Nigeria's oil company lacks funds to fix leaky pipelines

ABUJA, NIGERIA -  Nigeria's decades-old oil pipelines are vital for transporting crude, but most are now corroded and vulnerable to leaks and vandalism. The Nigerian National Petroleum Corporation says it lacks the funds to fix these pipelines, sparking concerns about Nigeria's oil production.

Oil fuels Nigeria’s economy, making up more than 90% of its export value. Pipelines are the veins transporting crude from production sites to ports and refineries.

But those pipelines have lost more than 3 million barrels of oil in the first five months of this year, according to data from the Nigerian Upstream Petroleum Regulatory Commission. That amounts to about $265 million or N400 billion, based on an average of $88 a barrel.

Nigerian National Petroleum Corporation's recent disclosure of a funding shortfall for pipeline maintenance could have serious consequences.

Faith Nwadishi, a leading Nigerian energy expert, raised the alarm about potential risks of this development.

“Why would they say that they have a shortage in funding, knowing that the pipelines are the vehicles for transmitting or transporting the crude that could actually bring in funds and revenue to the country? … When these things are not done, we are also encouraging oil theft. We are encouraging destruction of the environment, oil spillages that could come from these pipelines that are over aged,” Nwadishi said.

Although it remains a major oil producer, Nigeria is often behind on production targets because of theft and infrastructure challenges.

NNPC’s 2023 financial statements show it spent nearly $29 million or N45.88 billion, on pipeline security and maintenance nationwide.

Public policy analyst Jide Ojo blamed the maintenance shortfall on multiple factors, including corruption.

“Corruption is what is responsible for the funding challenge of NNPCL. … When things are shrouded in secrecy, it spaces room for abuse of office, corruption and all manners of malpractice. … For many decades, we didn’t even know how many liters of crude oil we were producing per day and there was a lot of impunity in that sector,” Ojo said.

Nigeria's 2022 Petroleum Industry Act aimed to boost sector performance and attract investments, but progress has been minimal.

Ojo stressed the need for better reforms to strengthen public-private partnerships.

“Government needs to have better policy environment. … The enabling environment needs to be better enhanced,” Ojo said. “Don’t forget, there is what is called the ease of doing business. I think the federal government needs to do more on that ease of doing business, so that our investors can come and make money, and be able to invest without much concern about repatriation of their money.”

Nigeria removed its petroleum subsidy in May 2023 to conserve oil revenue, causing fuel prices to surge.

Pipeline inefficiencies add to pricing pressure, straining Nigeria's fragile economy.

Nwadishi called for a lasting solution to the crisis.

“If these pipelines have outlived their relevance or their lifespan, they should be replaced. … There’s technology to monitor the pressures that come from the different pipelines, and the different points of intersection,” she said. “It could also help to know when there’s interference in the pipeline. It also further helps to determine where volumes are being lost, so that early repairs can be made, and it reduces cost.”