Crude supply to refineries by marine vessels increases cost

By Mahmud Jika

The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, has explained that the option of transporting crude oil to the refineries by marine vessels due to vandalism of pipelines has increased the cost of refining the product by $7 per barrel.

This is coming as the Chief Executive Officer of Seplat Petroleum Development Company Plc, Mr. Austin Avuru, has raised concern on the high rate of alarm being raised by some operators over crude oil theft.

Speaking yesterday in Lagos at the 38th Annual International Conference and Exhibition of the Society of Petroleum Engineers (SPE), Alison-Madueke described theft-related vandalism as the most prominent challenge that is negatively impacting Nigeria’s oil industry.

She said due to vandalism, crude oil supply to the refineries through pipelines had been affected, resulting to the option of crude transportation by marine vessels, thereby increasing the operating cost of refining by additional $7 per barrel.

The minister, who was represented by the Deputy Director of the Department of Petroleum Resources (DPR), Mr. Emmanuel Bekee, said, “Due to theft-related vandalism, crude oil supply to our refineries remains constrained, thus affecting uptime and volume. In order to mitigate this anomaly, the option of crude transportation by marine vessel has been deployed thereby increasing the operating cost of refining by an additional sum of $7 per barrel,” she added. Also speaking, Avuru raised concern on the increasing claims of crude oil theft and vandalism by some operators.

According to him, Platform Petroleum with its 48 kilometres pipeline recorded only 0.5 per cent theft between January and June this year, pointing out that the theft rate has dropped to zero since July this year.

Avuru further stated that Platform Petroleum has not recorded any single point of vandalism on its pipelines since July. He also disclosed that the rate of theft from Seplat Petroleum pipelines is also not quite alarming.

“So, where are others getting the theft rate of 22 per cent? Is it not in the same Niger Delta?,” he queried.

He predicted that Nigerian independent companies would account for 50 per cent of domestic gas by 2018. The Seplat boss said with the ongoing divestments of onshore assets by International Oil Companies (IOCs), Nigerian independents are increasingly being positioned to take control of such assets, while the operations of the IOCs would revolve around only offshore assets.

He noted that indigenous operators are already dominating the downstream sector, pointing out that only Total and Mobil are the only IOCs still operating in the downstream.

“By 2018, 50 per cent of domestic gas production to power the economy will come from Nigerian independents. The entire refining space will be with independents. If Dangote is able to build his refinery, a couple of other refineries will follow; either greenfield projects or through privatisation of existing refineries. By 2020, Nigeria’s refining capacity will reach 700,000 barrels per day,” he said.