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Nigeria under-declaring crude oil figures – BH investigation

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Nigeria under-declaring crude oil figures - BH investigation

…as OPEC, oil traders dispute NNPCL’s figures

Nigeria’s actual crude oil production figures are far above the official figures declared monthly by the supervising ministry and the two agencies saddled with the task of overseeing the nation’s upstream oil and gas sector, Business Hallmark findings have revealed.

Month after month, the trio of Ministry of Petroleum Resources, Nigerian National Petroleum Company Limited (NNPCL) and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) have officially supplied Nigeria’s daily and monthly crude oil production figures to the Organisation of Petroleum Exporting Countries (OPEC) as statutorily required.

However, the monthly figures, apart from lacking details, are full of discrepancies, fueling fears of corruption and underhand tactics by officials involved in the computation.

For instance, based on the data supplied to OPEC by NUPRC, Nigeria’s oil production figures, excluding condensates, stood at 1.427mbpd on average in January, 1.322mbpd in February, 1.23mbpd in March, 1.28mpbd in April and 1.25mpbd in May.

However, according to secondary sources, Nigeria’s oil production output stand at 1.419mbpd on average in January, 1.476mbpd in February, 1.39mbpd in March, 1.35mpbd in April and 1.41mbpd in May. The report for June 2024 is yet to he released.

When BH compared NUPRC’s figures of Nigeria’s monthly oil production in the first five months of 2024 to the ones tracked by secondary sources, Nigeria produced 8,000bpd lower than what was declared to OPEC in January. In February, March, April and May of 2024, Nigeria produced 15,000, 17,000, 7,000 and 16,000 per barrels per day consecutively more than what was reported to OPEC, according to secondary sources and the oil cartel itself.

Stakeholders in the oil and gas industry, especially OPEC, gather data on crude oil production from two sources: direct communication from oil producing countries and secondary communication from export terminals, oil traders, commodities exchanges, shipping and insurance firms and energy intelligence platforms like Vitoil, Trafigura, Glencore, Cargill, Mercurial, Bloomberg, Wood Mackenzie, Platts, Argus, Lloyd’s, AEGIS, among many others.

Some experts in the nation’s oil and gas industry, who spoke to our correspondent on the matter, claimed that the practice of under reporting their actual crude oil production by OPEC member countries is far more pronounced than widely reported.

According to the experts, countries under declare their actual oil production for several reasons.

“Your findings didn’t come as a surprise to me. It is an open secret in the oil and gas industry that most OPEC members under declare their actual production figures in a bid to circumvent the cap put on their production by the oil cartel meant to influence the prices of oil in the international market.

“If you can recall, Angola recently withdrew from OPEC while protesting the capping of its oil production quota to 1.1 million barrels a day, despite the 1.4 million barrels per day quota it asked for.

“Unlike Angola that couldn’t play the oil politics, other OPEC countries like Libya, United Arab Emirates (UAE), Iran and Iraq are known for supplying more oil into the market than declared.

“That is why oil prices have not gone beyond the $100 mark despite the agreement between OPEC and some countries led by Russia (OPEC plus) to cut production by about 2million barrels a day.

“It simply shows that more crude is being produced and clandestinely pushed into the oil market by producing nations.

“I think what is happening is that Nigeria wants to get the full benefits of being a member of OPEC, and at the same time, not ready to adhere fully to the carter’s allocation quota, which, if diligently followed, will deprive the country of the much needed funds.

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“However, people are no fools. Even OPEC knows what is happening. That’s why it quotes data from both primary and secondary sources

“Technology has made it easy to track every transaction. Traders know the amount of oil they buy. These crude are purchased using banks instruments, which are filled. They must transport it through shipping lines, which keep records. And before you can put them on the sea, they must be insured by competent firms. Borders controls at receiving ports or land borders also do their own inspections with documents.

“So, by and large, apart from crude products kept for local use by producing countries, virtually every barrel of crude shipped abroad can be tracked.

So, let the NNPC and NUPRC continue to give whatever figures they want, the world knows our actual production figures”, explained Dr. Segun Jaiyeola, a geologist with an oil servicing firm in Port Harcourt.

Another oil expert, Ronald Duncan, who reports for Engel, an international energy news site focusing on oil and gas and alternative energy, informed our correspondent that data gotten from energy intelligence platforms are more reliable than those supplied by oil producing nations like Nigeria.

According to him, accurate data in Nigeria and most developing countries are difficult to come by and cannot be relied on.

“Whether it is a deliberate act or sheer incompetence, most data out of Nigeria, especially those prepared by government agencies and officials are largely out of tune.

“Or how do you explain the Ministry of Petroleum Resources, NNPC and NUPRC presenting the same report with wide disparities?

“I remember a particular year when the NNPC put Nigeria’s crude oil output at 1.23mbpd for a particular month. Meanwhile, the ministry of petroleum resources and the defunct Department of Petroleum Resources (DPR) gave different figures of 1.7mbpd and 1.45mbpd respectively. These represents between 20% and 40% differences in percentage points.

“In the accounting world, the disparities are too wide, putting the whole figures in doubt. It then becomes a question of who to believe.

“But if you look at the reports by traders, energy platforms and news outlets like Bloomberg, Reuters, Angus and Platts for instance, you will see that the differences in their figures are negligible.

“For example, if Nigeria produces 1.4mbpd, tracking agencies should be able to trace the flow of at least 95 per cent of the products. Based on that percentage, the variation in production figures should normally be between 1.35mbpd and 1.45mbpd. Any figure outside that band should be questioned”, he stated.

A Nigerian stakeholder in the upstream oil and gas sector, who did not want his identity disclosed, told our correspondent that a large chunk of crude oil produced in Nigeria are not accounted for.

According to him, apart from crude that passes through the nation’s official export terminals, products retained for local use, as well as those taken directly from flow stations with the active collaboration of collaborating foreign firms are very difficult to track.

“The figures OPEC and energy platforms normally display are those that pass through our export terminals. On the other hand, those set aside for local use are largely under reported, unless reported by the NNPCL or NUPRC.

“Meanwhile, these crude still find their way into Eastern Europe, Asia and the Middle East through the help of unscrupulous entities like the Chinese oil giant, PetrolChina.

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“I can say with confidence that between 150,000bpd and 200,000bpd of all crude oil explored in Nigeria are not officially accounted for.

“While Nigeria, in its bid to circumvent OPEC’s production cap, gets about half of the under-declared oil proceeds, the rest are stolen by oil thieves with proceeds from the sales ending up in private pockets”, the source stated.

Also, a recent article titled: “The Impediments to Nigeria Understanding Oil Production Volumes, Losses and Potential Solutions”, co-authored by Messrs Sidikat Modupe Ibrahim, Paul Bills, John Allport and Radu Racasan, says the issue of the quantity of oil produced or missing has traditionally been played down in Nigeria.

“This is evident as no one in or outside Nigeria is able to quote a totally reliable production volume or loss figure”, the report noted.

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