Nigerian Oil Pipeline Sabotage Threatens Revival of Crude Output

Nigeria’s attempts to enhance oil production and attract investment are threatened by sabotage on its crude pipeline system, specifically the Trans-Niger Pipeline. President Tinubu has declared a state of emergency in Rivers State, spurred by political instability and ongoing sabotage. Despite recent rises in production and surpassing the OPEC quota, persistent challenges remain.

Nigeria’s efforts to revitalize oil production and attract investment are jeopardized due to recent sabotage incidents affecting its crude pipeline system. Improvements in security have contributed to a 40% increase in production levels, following significant declines in previous years. Notably, the country managed to exceed its OPEC quota earlier this year, marking a critical recovery phase.

The vandalism on the Trans-Niger Pipeline, responsible for transporting about 15% of Nigeria’s oil exports, poses a setback for the government. In response, President Bola Tinubu declared a state of emergency in Rivers State due to an ongoing political stalemate that has hindered efforts to mitigate vandalism perpetrated by militant groups.

Clementine Wallop, a director for sub-Saharan Africa at Horizon Engage, noted that recent sabotage undermines the progress made by the Tinubu administration in stabilizing oil output and presents a troubling investment outlook. Meanwhile, Renaissance Africa Energy, a newly-formed consortium that recently acquired the TNP from Shell Plc, has announced it will not declare a force majeure over Bonny Light crude exports, despite two tankers awaiting loading.

In 2022, security failures had led to illegal tapping of the TNP at approximately 150 locations, resulting in producers only recovering a minimal portion of their output. While enhanced security on oil pipelines has diverted thieves to gas lines, the resurgence of sabotage poses significant challenges as the economy heavily relies on oil and gas revenue for budgetary support.

Political instability further complicates the situation, stemming from a fallout between Rivers State Governor Siminalayi Fubara and his predecessor, Nyesom Wike, after the elections in 2023. This discord has created factions that raise concerns about potential violence. Wallop indicated that ongoing unrest is a legitimate concern.

The ruling by Nigeria’s highest court, deeming Fubara’s governance without legislative support as illegal, has further escalated tensions, as the court mandated the central bank to withhold revenue allocations primarily from crude oil sales. Consequently, President Tinubu suspended Fubara and local legislators for six months and appointed a retired military administrator as the state’s governor.

In light of the vandalism, Renaissance is undertaking a joint investigation. Though avoiding the force majeure clause, the incident represents a significant challenge for the consortium. According to Mansur Mohammed from Wood Mackenzie Ltd., the strategies employed by Renaissance will be critical in shaping how local operators address the challenges within Nigeria’s oil and gas sector.

In conclusion, Nigeria’s recent progress in oil production faces significant risks due to pipeline sabotage and political instability. The declaration of a state of emergency and the ongoing investigation into vandalism underscore the complexities of securing investments in the oil sector. The local consortium’s response to present challenges will be pivotal in determining the future landscape of Nigeria’s oil and gas industry.

Original Source: www.rigzone.com