Vandalism, Others Push Oil Firms’ Bank Borrowing To N5.68tn

The debt of oil firms operating in the downstream and upstream subsectors of the Nigerian oil and gas industry increased from ₦5.19tn in January 2021 to ₦5.68tn in December 2021.

It was gathered that operators in the oil sector borrowed ₦290bn from Nigerian banks in 2021 amid the significant rise in global crude oil prices.

According to the data released by the Central Bank of Nigeria, the debt of companies in the oil and gas sector increased to ₦4.21tn in December from ₦3.92tn in January 2021.

The data revealed that operators in the upstream and services subsectors owed banks ₦1.47tn in December, an increase of ₦200bn from ₦1.27tn in January 2021.

As of December 2021, oil and gas operators’ debt stood at ₦5.68tn, which represents 23.3 per cent of the ₦24.38tn loans advanced to the private sector by the nation’s banks, according to the sectoral deposit money banks’ credit by the CBN.

The CBN data revealed that the oil and gas firms received the biggest share of the deposit money banks’ credit disbursement to the private sector.

The Petroleum and Natural Gas Senior Staff Association of Nigeria in March raised the alarm over the huge losses incurred by operators in the oil and gas industry as a result of vandalism and oil theft.

The President of PENGASSAN, Festus Osifo, noted that between October 2021 and February 2022, over 90 per cent of crude oil pumped into the Trans National Pipeline by operators was vandalised.

He further stated that this made Nigeria lose out on accruing more revenue despite the current high price of crude oil in the international market.

Osifo said another problem arising from vandalism was that companies were being forced to go into curtailment when the assets/export pipelines were damaged as they could not export what they produced, thereby incurring production losses.

According to him, each operator in the sector loses an average of 10 days of production shut-in monthly due to vandalism.

He said, “Recent preliminary work showed that about 150 illegal tappings were used in siphoning crude oil from the TNP.

“This has forced all operators injecting crude into the TNP to suspend export/injection thereby shutting-in production. Total Energies and SPDC for example stopped production into the TNP pipeline while Agip Eni declare force majeure on their brass terminal.”

A petroleum engineer and oil and gas analyst, Bala Zaka, while speaking on the issue, listed vandalism and insecurity among the major concerns in the sector, describing them as the primary reasons for the high rate of borrowing among oil firms.

Zaka while speaking with Punch on Monday said vandalism and insecurity had increased the operating cost of oil and gas firms.

In a bid to offset the growing costs, he said companies in the sector had been forced to turn to financial institutions.

He said, “The operating cost of oil and gas firms, both those in the downstream and upstream sub-sectors, is very high now, particularly because of issues of vandalism and security.

“You will see that because of insecurity problems, many of these companies, both onshore and offshore; employ the services of heavy security personnel to safeguard their equipment. Sometimes even their staff has to be secured.

“This additional security costs a lot of money; this is affecting their bottom line and profit before tax. On the issue of vandalism, I have observed that a lot of these firms are being harassed by their host communities which is why improve their CSR and give back to these communities.”

He added, “Again, for companies who have joint-venture relationships with the government or the Nigerian National Petroleum Corporation; there is what we call cash call. This is a situation where for every well the companies intend to explore, the Federal Government is supposed to contribute about 60 per cent of the cost of exploration, but most of the time they don’t. So these oil companies are forced to source for the 60 per cent from financial institutions.”