Nigerian Pipeline Security Will Result In Monthly Savings Of $700 Million – FDC

Nigeria-Morocco energy Gas Pipeline project

According to BusinessDay, securing Nigeria’s leaky pipelines that transport crude oil from wells to flow stations in the Niger Delta, where more than 90% of the country’s crude is explored, may save the continent’s largest economy $700m each month.

The agreement between Tantila Security Services Limited, a business owned by Government Oweizide Ekpemupolo alias Tompolo, and the Nigerian National Petroleum Company (NNPC) Limited is expected to save the country $700 million in lost revenue each month, according to analysts at Financial Derivatives Company Limited (FDC).

“Tompolo deal may salvage $700mn monthly,” according to FDC’s LBS October analysis.

The Federal Government was compelled to extend its contract with Tompolo, the leader of the now-defunct Movement for the Emancipation of the Niger Delta (MEND), to monitor oil pipelines due to declining revenue and mounting debt.

A deal that was first proposed in 2014 by Diezani Alison-Madueke, a former minister of petroleum resources in the Goodluck Jonathan administration.

The contract award to Tantila Security Services Limited was defended by Mele Kyari, the Group Managing Director of NNPC Limited, who claimed that up to 500,000 barrels of crude oil were stolen every day.

Using a baseline price of $95 per barrel for London Brent as of September 2023, he said it was a reprehensible situation that cost the country almost $38 million in missed revenue.

“The security agencies are doing their part. End-to-end pipeline surveillance would require the involvement of private entities and community stakeholders,” Kyari said, adding that the collaborative effort of the security agencies and the private contractors would help deal with the revenue leakage problem.

The deal, which is worth N4 billion per month, calls for high-level surveillance of pipelines and oil wells throughout the Niger Delta’s waterways as well as the detection and notification of unidentified vessels and batches to any Nigerian security authorities.

Despite the controversy surrounding the contract, the head of NNPC is certain that Tompolo’s company will prevail over rivals because to its strong financial position and extensive local experience.

Before Tompolo’s contract was terminated in 2015, BusinessDay discovered that the measures he put in place had reduced illicit bunkering and raised Nigeria’s production to about two million barrels per day.

The recent finding of unauthorized oil pipelines by Tompolo proved the security agencies in Nigeria were responsible for the theft of crude oil. The score points of this arrangement include up to 58 illegal tapping places that crude oil thieves employed in the states of Delta and Bayelsa.

The NNPC will probably save an additional 150,000 barrels as a result of the tapping locations’ finding.

The discovery of an illicit oil tanker carrying stolen crude oil barrels may be the most well-known accomplishment of the Tompolo—NNPC cooperation.

The conclusion of the agreement will stop the significant revenue leakage while also boosting investor confidence in the oil and gas industry.

The benefits of the Tompolo–NNPC pact, according to analysts at FDC, would enable the CBN to engage in the FX market more skillfully, increasing the likelihood that the naira will remain stable.

According to Stella, CEO of Dantel Oil & Gas Service Limited, “perhaps, the injection of dollars into the CBN’s coffers would help the CBN intervene aggressively in the FX market and arrest the collapse of the naira.”

The Federal Government’s renewed engagement with ex-militants, according to some industry analysts, may increase the danger in the oil-rich Niger Delta.

A military commander who is familiar with the Niger Delta region told BusinessDay that giving a former militant there an N4 billion monthly contract sends the wrong message to a region that is very unstable and home to a variety of militant organizations.

He claimed that it was challenging to curb the thirst of terrorists because the majority of them steal oil, which frequently causes pipeline breaks, spills, and force majeure on petroleum exports and production.

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