By Adewale Sanyaolu
The persistent oil theft and its attendant effect on the economy has left the nation’s revenue in dire strait as government battles with low oil production.
On a month-on month basis, Nigeria has consistently failed to meet its Organisation of Petroleum Exporting Countries (OPEC) quota, leading to increased pressure on government resources.
According to latest statistics from OPEC Monthly Oil Market Report for September, the country’s crude oil output fell to 900, 000 barrels per day (b/d) last August
The OPEC report had noted that Nigeria’s crude oil production (according to data reported by direct sources) dropped from 1 million b/d recorded in July, to 900, 000 b/d in August.
Since then crude oil production has been falling consistently over the years with production hitting a low of 1.4mb/d in 2020.
Production crashed further to 1.3mb/d at the beginning of 2021, and deeper to 1.2mb/d in the first quarter of this year.
As at the second quarter of this year, output dropped to 1.1mb/d, to 1mb/d in July, and 900, 000b/d in August.
This was as the country’s rig count went from 16 recorded in 2019 to 10 in August 2022.
However, the recent conclusion of a stakeholders meeting on the implementation of key regulations in the PIA by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) helped address the industry concerns about oil theft and underproduction of oil.
Indeed, the Commission at the stakeholders’ parley on two regulations which included; the Frontier Exploration Fund (FEF) and the Host Communities Trust Fund (HCTF) assured that both regulations would bring relief to the oil industry, investors and other critical stakeholders.
Speaking at the meeting, NUPRC Chief Executive Officer (CEO), Mr. Gbenga Komolafe, said FEF would be deployed annually to fund oil and gas search in the frontier basins of Nigeria under the PIA. He added that FEF will be mainly extracted from 30 per cent of the Nigerian National Petroleum Company (NNPCL) profit from oil and gas, while 3 per cent of operating expenditure approved under the Act, would be spent on the Host Communities Trust Fund (HCTF).
Komolafe also revealed that progress was being made on phase one of the exercise , leading to the gazetting of the HCTF.
The HCTF according to Komolafe is expected to provide the much-needed relief for oil producing areas of the Niger Delta following several years of neglect by oil companies and government.
Taming oil theft with HCTF
But a recent disclosure by the Group Chief Executive Officer (GCEO) of the NNPCL, Mr.Mele Kyari, that Nigeria loses 95 per cent of its oil production to theft is mind boggling.
“What is most difficult to manage today is the issue of crude oil theft, it is real and it is happening,” Kyari told a session at a state house briefing in Abuja.
“Are we helpless? No, we are not helpless and our efforts are paying off. “As we speak now, what you see on the screen is a typical site where crude oil is stolen and processed in illegal refineries. And this is so common around the pipeline that I can tell you in one line just less than 200 kilometres we had 295 illegal connections and you see the data,” he said.
The claims by Kyari was further buttressed by the Chairman of Heirs Holdings, Mr. Tony Elumelu, who in March, twitted on his verified Twitter Handle that Bonny Terminal that should be receiving over 200,000 barrels of crude oil daily (bpd), was gettting less than 3,000 bpd, forcing Shell and Eni to declare a force majeure.
‘‘This morning, I was listening to my colleagues at the office bemoan the very pressing issues that they face every day in this country, and how things have been getting worse and worse,-no electricity for five days, hike in the of diesel, frightening food inflation.
Industry observers are, however, optimistic that the HCDTF which has the NUPRC as its implementation agency was capable of bringing the monster of oil theft to its kneel because communities hosting oil companies will begin to see the assets as theirs.
“Moreover, this forum serves as an avenue to listen to our stakeholders more, understand their views about our regulations and secure their buy- in of the Regulations, which ultimately determines our success of full implementation of the PIA. With this procedure of rulemaking, it is believed that consensus will be built, trust between the regulator and the regulated entities will improve and ultimately, the regulations will be easier to implement and sustained”, he said.
Similarly, the Commission’s Chief Executive Officer, Gbenga Komolafe, represented at the meeting by the Executive Director, Health, Safety and Environment, Captain John Tola said meeting was in compliance with section 216(4)(g) of the PIA.
What the HCDTF says
Section 239 of the PIA provides that the constitution of the host community development trust shall allow the host communities development trust to manage and supervise the administration of the annual contribution of the settler as contemplated under the Act and any other sources of funding.
The objectives of the Trust as provided under Section 239 (3) include the following, to finance and execute projects for the benefit and sustainable development of the host communities, undertake infrastructural development of the host communities within the scope of funds available to the Board of Trustees for such purposes, facilitate economic empowerment opportunities in the host communities, advance and propagate educational develop
ment for the benefit of members of the host communities and support healthcare development for the host communities.
Others are; support local initiatives within the host communities, which seek to enhance the protection of the environment, support local initiatives within the host communities which seek to enhance security, invest part of the available fund for and on behalf of the host communities and sssist in any other developmental purpose deemed beneficial to the host communities as may be determined by the Board of Trustees.
Recently, a non-governmental organisation, Connected Development (CODE), called for the immediate implementation of chapter three of the PIA, which provides direct social and economic benefits to oil host communities.
The CODE Programme Manager, Kingsley Agu, made the call at a stakeholders’ sensitisation in Port Harcourt, Rivers State recently.
The PIA 2021 was passed into law to solve the age-old problem of oil bearing communities following the activities of oil companies through the establishment of the Host Communities Development Trust.
The CODE project manager explained that it was the legal right of the host communities to be part of decision making in the implementation of the PIA in their various communities.
“We are taking them through the entire section of the PIA as an overview and dwelling more on the host communities’ development. The PIA has five chapters and chapter three focuses on issues about host communities and what should be done for them.
“Our focus is the fact that host communities need to be given more powers, especially in the implementation of Host Community Development Trust.”
The State Support officer for CODE, Charles Mffot, stressed the need for the communities concerned to understand that what the government had put together was favourable to them so that their communities could develop better than what was currently available.
Agu said the essence of the programme was to enable the oil host communities to understand the PIA and also teach them how to follow it up for implementation.
A boost to oil production, reserves with FEF
Rising from a recent consultation, NUPRC said the PIA provides for FEF to be deployed annually to fund search for oil and gas in the frontier basins.
According to the PIA, FEF will be mainly extracted from 30 per cent of the Nigerian National Petroleum Company (NNPCL) profit from oil and gas, while 3 per cent of operating expenditure approved under the Act, would be spent on the Host Communities Trust Fund (HCTF).
Frontier exploration is essentially searching for hydrocarbons crude oil, natural gas and other resources, in the inland basins around the country.
GCEO of NNPC, Mele Kyari, had during a interview on NTA said the allocation of three per cent oil companies operating expense to host communities was higher than 30 per cent of profit oil and gas for frontier exploration.
Though leaders in Niger Delta have criticised the three per cent annual allocation to host communities from the operator’s operating expenditure.
They described it as a “meagre portion” compared to the level of environmental degradation and development in the region, some even frowned at 30 percent allocation for the search of oil and its discovery.
But speaking during the interview, Kyari said the allocation for host communities has a low percentage but a bigger value.
He said: “For instance, when you say 30 per cent profit oil and gas from NNPC shares or from PSC, it is a very small number. The percentages appear very outrageous but 30 per cent of what? Nobody has sat down to look at it. When you say profit oil 30 per cent, it probably comes down to less than $400 million per annum.
“But when you come to the host communities, you have three per cent of our operating expense. We spent about $16 billion in fiscal 2020 in our operating expense across the industry. So, when you take three per cent of that number, it comes to $500 million, which is far above the budget of NDDC.
With funds dedicated to frontier exploration, industry observers believe that such will help increase the country’s oil production and reserves.
According to NUPRC, Nigeria’s crude oil exploration is mainly from the offshore, continental shelf and onshore fields largely in the Niger Delta.