Nigeria’s crude evacuation now costs $12 per barrel

Mkpoikana Udoma

Port Harcourt — Nigeria’s oil and gas industry is losing billions of dollars annually to crude evacuation challenges, with operators now spending as much as $12 per barrel just to move crude from fields to export terminals, the Petroleum Technology Association of Nigeria, PETAN, has revealed.

Speaking at a Townhall Session of the just concluded 14th Practical Nigerian Content, PNC, Conference in Yenagoa, PETAN President, Engr. Wole Ogunsanya, warned that evacuation, not production, is the single biggest cost driver in Nigeria’s upstream sector.

According to him, persistent pipeline vandalism, crude theft, and insecurity have forced companies to rely heavily on barges and vessels, resulting in exorbitant evacuation costs.

“Our pipelines are vandalised, and some companies use vessels and barges to move crude oil, at a cost of $12 per barrel,” Ogunsanya stated. He added that the cost also includes payments to security escorts.

Ogunsanya stressed that while Nigeria’s production CAPEX remains among the lowest in Africa, these evacuation-related expenses distort perceptions of the country’s competitiveness.

“Nigeria’s CAPEX rates are arguably the lowest on the continent,” he said, noting that operating expenditures, OPEX, are inflated by security and logistics concerns rather than inefficiencies in the service sector.

Providing comparative context, the PETAN boss disclosed that contracting a land rig in India costs up to $60,000 per day, but the same service in Nigeria costs as low as $30,000. He attributed this to local content policies, saying, “Local content policy and practice in the industry here subsidises oil and gas production.”

Ogunsanya also criticised the activities of “portfolio companies” that inflate costs through fraudulent practices.

“We are aware of portfolio companies that obtained NCEC certificates, got onto NIPEX and had projects awarded to them without the required operational assets,” he said, urging regulators to intensify enforcement.

He praised the Presidential Directive of March 24, 2024, which barred such portfolio companies from participating in the sector.

He appealed to the Nigerian Content Development and Monitoring Board, NCDMB, and the NNPC Ltd. to collaborate with PETAN in benchmarking global project costs to strengthen accountability.

Other presenters at the session addressed key industry issues, including Nigerian Content Equipment Certificates, NCEC, and access to intervention funds.

The NCDMB’s Director of Capacity Building, Engr. Abayomi Bamidele, announced the introduction of new “Guidance Notes” to simplify the NCEC application process, advising firms to apply only in categories where they have proven capacity.

On funding, the NCDMB clarified that its $400 million Nigerian Content Intervention Fund is not accessible for Research and Development, R&D, though R&D firms may access the separate $50 million Nigerian Content Research and Development Fund.