Nigeria has lost an alarming 362.28 million barrels of crude oil between 2014 and 2023, according to a comprehensive report by the Nigeria Extractive Industries Transparency Initiative (NEITI). The losses, attributed to a combination of measurement errors, sabotage, and production adjustments, represent a significant blow to the country’s economy and its oil industry. On average, Nigeria lost 992,547 barrels of crude oil per day over the ten-year period.
The details of these losses were disclosed in NEITI’s latest report titled *Oil & Gas Industry Audit 2023: An Independent Report Assessing and Reconciling Physical, Process, and Financial Flows within Nigeria’s Oil & Gas Industry*. This extensive audit was conducted to assess the physical and financial activities within the oil and gas sector, shining a spotlight on both the challenges and opportunities within Nigeria’s largest revenue-generating industry.
One of the major contributors to this loss, as highlighted in the report, was crude oil deferment, which totaled 110.66 million barrels during the period under review. Deferment occurs when production is halted due to factors such as scheduled and unscheduled repairs, pipeline breaks or leaks, and poor equipment performance. NEITI also identified outdated infrastructure, particularly old and corroded pipelines, as one of the critical issues affecting the efficiency of oil transportation in the country.
NEITI conducted the report by reviewing several sources, including data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and company records, particularly those from the Nigerian National Petroleum Company Limited (NNPC). These records provided a comprehensive breakdown of the crude oil losses and deferment over the years, offering insight into both the magnitude and reasons behind these challenges.
The report’s breakdown of crude oil losses indicates a significant increase over the years, starting from a modest loss of one million barrels in 2014. By 2015, this number had surged to 27.12 million barrels, reflecting a 2,612 percent increase. However, the most alarming figure came in 2016, when Nigeria recorded its highest-ever crude oil loss of 101.6 million barrels. This translates to an average daily loss of 278,356 barrels, costing the country a potential revenue of $4.6 billion, given that crude oil prices averaged $46.07 per barrel that year.
The upward trend in crude oil losses was not consistent. In 2017, the country lost 36.46 million barrels, translating to a daily average loss of 99,890 barrels. With crude oil prices averaging $54.32 per barrel, Nigeria lost an estimated $1.9 billion that year due to theft and sabotage. The figure jumped again in 2018 to 53.28 million barrels, equating to a daily average loss of 145,972 barrels. With an average crude price of $72.58 per barrel, the country forfeited $3.8 billion in potential revenue.
In 2019, crude oil losses slightly reduced to 42.25 million barrels, but this still resulted in a daily loss of 115,753 barrels. The average crude oil price that year was $65.49 per barrel, meaning Nigeria lost approximately $2.7 billion to theft and operational inefficiencies. While the downward trend continued in 2020 with losses of 39.08 million barrels, the number dropped significantly to 17.57 million barrels in 2021 before rising again to 36.69 million barrels in 2022.
The report noted that despite these fluctuations, Nigeria made substantial progress in 2023, with crude oil losses dropping to 7.68 million barrels, representing a significant 79 percent reduction from the previous year. This averages to a loss of 21,041 barrels per day. NEITI attributed this decline to government efforts aimed at curbing crude oil theft, improving operational efficiency, and increasing accountability within the sector. The 2023 losses were attributed to measurement errors (2.91 million barrels), theft and sabotage (5.25 million barrels), and production adjustments (486,746 barrels).
In analyzing the overall impact of these losses, the report emphasized that Nigeria, as an oil-producing country, continues to face significant hurdles in fully maximizing its oil and gas potential. The use of outdated infrastructure, particularly aging pipelines, remains a key issue, making it difficult to address the persistent problems of oil theft and sabotage. NEITI’s findings underscore the need for urgent action to modernize Nigeria’s oil and gas infrastructure and enhance security measures.
NEITI’s recommendations were clear: to address the root causes of these oil losses, the government should consider adopting viable public-private partnerships aimed at deploying advanced digital solutions. These solutions would help in accurately tracking crude oil losses, as well as creating a system for monetizing the savings generated from curbing these losses. Additionally, NEITI advised the government to set up a database for aggregating cases of crude oil losses, which would provide a clearer picture of how much oil is being lost and allow for better monitoring and management.
The report also called for the establishment of a special fund and a standby committee focused on the prevention of crude oil losses and the security of Nigeria’s oil and gas assets. These measures, according to NEITI, would provide a more coordinated response to the ongoing theft and sabotage within the industry. Furthermore, it urged the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) and other stakeholders to accelerate efforts to deploy a platform for tracking petroleum product losses that could disrupt the availability of these resources.
Despite the challenges highlighted, the report expressed optimism about the future of Nigeria’s oil industry, stating that with the right measures in place, the country has the potential to significantly increase its oil production. NEITI pointed to the need for a forensic audit of wellheads and production platforms to ramp up crude oil production to the 2013 annual average of 800 million barrels. This, combined with better security measures and the use of modern technology, could position Nigeria to take full advantage of its vast oil reserves and enhance its revenue generation capacity.
The NEITI report serves as a crucial reminder of the need for ongoing reforms in Nigeria’s oil and gas sector. While progress has been made, there is still much work to be done to ensure that the country can fully capitalize on its oil resources and reduce the staggering losses that have been recorded over the past decade.
