Nigeria’s Oil, Gas Earnings Slumped To $17.05bn In 2016, Lowest In 10 Years

  • Nigeria’s Oil, Gas Earnings Slumped To $17.05bn In 2016, Lowest In 10 Years
  • The total financial flows from Nigeria’s oil and gas sector slumped to $17.05 billion in 2016, representing a 31 per cent decline when compared to $24.79 billion in 2015, and a 75 percent plunge on the sector’s peak earnings of $68.44 billion generated in 2011.

    The figures are contained in the latest report of the Nigeria Extractive Industries Transparency Initiative (NEITI) released on Friday in Abuja.
    Analysis of the report showed that the $17.05 billion earned in 2016 is the lowest in ten years and the fifth lowest in the 18 years covered by NEITI’s audit reports so far (1999 to 2016).

    According to the report titled ‘NEITI 2016 Oil and Gas Industry Audit Report’, the plunge in revenue in 2016 resulted from the double whammy of low oil prices in the global market and reduced oil production in Nigeria, which in turn was caused by disruption and vandalism of oil assets and spike in crude theft, among others.

    Yearly average price of crude oil per barrel was $43.73 in 2016 as against $52.5 in 2015. Total oil production in 2016 was 659 million barrels as against 776 million barrels produced in 2015, a fall of 15 percent.

    According to the report, details of which were explained by NEITI’s spokesman, Dr. Orji Ogbonnaya Orji, the losses due to crude oil theft and sabotage rose from 27 million barrels in 2015 to 101 million barrels in 2016, representing an increase of 274 percent. This was aside losses due to deferment, which in 2016 was put at 144 million barrels which also went up by 65 percent when compared to the 87.5 million barrels in 2015.

    “The bombing of the under-water 48-inch Forcados Oil Loading/Export Pipeline was one of many major occurrences that befell the industry in the year under review.

    “This incident occurred in February 2016 and the line remained not operational for seven months,” the NEITI report stated.

    The report noted that after surviving the slump in the global oil market in 2008 and 2009, Nigeria’s oil sector rebounded in 2010 with a 49 percent increase in total financial flows to $44.94 billion, followed by the peak of $68.44 billion in 2011.

    However, flows from the sector have been trending downward since that peak year with $62.94 billion generated in 2012, $58.08 billion in 2013, $54.56 billion in 2014, and $24.79 billion in 2015.

    Similarly, oil production has been on steady decline with 866 million barrels produced in 2012, 800 million barrels in 2013, 798 million barrels in 2014, 776 million barrels in 2015 and 659 million barrels in 2016.

    NEITI’s audit reports independently reconcile payments by companies against receipts by government agencies, and cover key financial flows such as earnings from sale of Federation’s crude oil and gas, sector-specific taxes, fees and levies such as royalty, Petroleum Profit Tax (PPT), signature bonus, gas flared penalty, and other flows such as NDDC contribution, NCDMB levy, NESS fees, education tax and others.

    The breakdown of the payment showed that the major earnings for 2016 came from export and domestic sale of the Federation crude oil and gas with $7.97 billion, PPT with $4.21 billion, and royalty oil with $1.57 billion.

    A major highlight of 2016, according to the report, was that for the first time in Nigeria’s history, crude oil produced from Production Sharing Contracts (PSCs) overtook output from the Joint Ventures (JVs).

    “In 2016, PSCs accounted for 324 million barrels, while the JVs accounted for 289.1 million barrels, (as against the 320 million barrels for PSCs and 375.5 million barrels for JVs in 2015).

    “PSCs, a production arrangement introduced in 1993, thus became the leading production arrangement in 2016. The PSCs are mostly offshore, thus insulated from vandalism and sabotage, and are not constrained by adequacy/availability of equity funding by the Federation.

    “This change in production structure pushes to the fore the need to renegotiate the terms of the PSCs as stipulated in the Deep Offshore and Inland Basin Production Sharing Contracts Act of 1993 so as to increase government’s take.

    The 2016 NEITI report covered 84 entities, comprising the following: ten government agencies, seven power generating companies, 62 oil and gas companies, three refineries, and the NLNG and NGC.

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