Nigerian oil company has no money to fix leaking pipelines

Nigeria’s decades-old oil pipelines are vital to transporting crude, but most are now corroded and vulnerable to leaks and vandalism. The Nigerian National Petroleum Corporation says it does not have enough money to repair them, raising concerns about Nigeria’s oil production.

Oil fuels Nigeria’s economy, accounting for over 90% of its export value. Pipelines are the arteries that transport crude oil from production sites to ports and refineries.

But those pipelines have lost more than 3 million barrels of oil in the first five months of this year, according to data from the Nigerian Upstream Petroleum Regulatory Commission. That amounts to about $265 million or N400 billion, based on an average of $88 per barrel.

The recent announcement by Nigerian National Petroleum Corporation of a pipeline maintenance funding shortfall could have serious implications.

Faith Nwadishi, a leading Nigerian energy expert, raised the alarm about the potential risks of this development.

“Why would they say they are short of funding, knowing that the pipelines are the vehicles for transporting or transferring the crude oil that could actually generate money and revenue for the country? … If these things are not done, we are also encouraging oil theft. We are encouraging environmental destruction, oil spills that can occur from these pipelines that are too old,” Nwadishi said.

Although Nigeria remains a major oil producer, the country often lags behind production targets due to theft and infrastructure problems.

NNPC’s 2023 financial statements show that nearly $29 million, or 45.88 billion naira, was spent on the security and maintenance of pipelines across the country.

Public policy analyst Jide Ojo blamed several factors for the lack of maintenance, including corruption.

“Corruption is the root cause of NNPCL’s funding problems. … When things are shrouded in secrecy, it creates room for abuse of power, corruption and all kinds of malpractices. … For many decades, we did not even know how many litres of crude oil we were producing per day and there was a lot of impunity in that sector,” Ojo said.

The Nigerian Petroleum Industry Act of 2022 aimed to improve the sector’s performance and attract investment, but progress has been minimal.

Ojo stressed the need for better reforms to strengthen public-private partnerships.

“The government needs to have a better policy environment. … The enabling environment needs to be improved more,” Ojo said. “Don’t forget that there is such a thing as ease of doing business. I think the federal government needs to do more on that ease of doing business so that our investors can come and make money, and invest without having to worry too much about the return of their money.”

In May 2023, Nigeria scrapped oil subsidies to save oil revenues, causing fuel prices to rise.

Pipeline inefficiencies are putting pressure on prices and straining Nigeria’s fragile economy.

Nwadishi called for a sustainable solution to the crisis.

“Once these pipelines have outlived their relevance or lifespan, they need to be replaced. … There is technology to monitor the pressure coming from the different pipelines and the different intersections,” she said. “It could also help to know when there is interference in the pipeline. It also helps to determine where volumes are being lost so that repairs can be made early and it reduces costs.”