Getting accurate oil output, sales data

What is the volume of the country’s oil production and the quantity of fuel consumed daily? They have largely remained unknown for over two decades. But the Federal Government is set to lay these issues to rest. The Ministry of Petroleum and the Department of Petroleum Resources (DPR) have begun to track crude production, export and import and distribution of petrol to get the right figures. Assistant Editor EMEKA UGWUANYI examines the development and its impact on the petroleum industry and the economy.

MANY Nigerians who are conversant with the oil and gas industry have over the years doubted the crude production figures released by the Department of Petroleum Resources (DPR) and the Nigerian National Petroleum Corporation (NNPC), as well as the volume of fuel consumed daily.

Last July, the NNPC confirmed that the country doesn’t know its actual fuel consumption, but noted it has put measures in place to determine its daily purchases.

The NNPC (Downstream) Chief Operating Officer, Mr. Henry Obih, at last year’s Nigerian Oil and Gas Conference and Exhibition in Abuja, said the Corporation had got the mandate to determine actual consumption of fuel, saying the Federal Executive Council (FEC) gave the greenlight to the NNPC, directing the Corporation to work with other relevant agencies to achieve the mandate.

FEC gave the directive as a result of the controversy trailing the national fuel consumption figure.The NNPC had put country’s fuel consumption at 65 million litres daily, blaming the sharp rise from 35 million to 41 million litres per day on rising cases of smuggling or diversion of the product to neighbouring countries. It cited the proliferation of filling stations along the country’s borders.

Governors faulted the 65 million litres per day consumption figures, noting that it was a ploy by the NNPC to cut its remittances to the Federation Account, which was another major reason FEC gave the order.

Crude oil production figures

The Nigeria Extractive Industry Transparency Initiative (NEITI) also confirmed Nigeria does not know the quantity of its crude oil. Its Executive Secretary, Waziri Adio, made the this known in 2016 when the agency officials appeared at the plenary of the Senate to brief the lawmakers on the 2013 NEITI audit report. He told the lawmakers that the country was yet to know its oil and gas production capacity.

Adio frowned at the situation where a nation doesn’t know its oil production figures, adding that he regretted the level of mismanagement of resources in the sector over the years. The country has no specific record of the quantity of oil it has produced over the years, he insisted. Although the Senate promised to determine any relevant legislative action that would be required to block leakages, nothing was done until recently.

Despite the insecurity that threatens oil and production, such as pipeline destruction, crude and fuel theft, there is this belief that any figure given by any organisation, be it government agency or a private firm, is not reliable because of the corruption in the industry. Over the years, crude production, according to the NNPC, has been between 1.6 million barrels and 2.1 million barrels per day. Currently, it is about 1.7 million barrels per day.

Oil production, export and import tracking and monitoring technology is, particularly, important given the strategic position of the sector as the mainstay of the economy, which necessitated the dire need of optimising the regulatory space to ensure the ease of doing business, entrench transparency in public governance, shore up revenue streams and fast-track inter-sectoral linkages to enhance the value creation and attainment of the economic growth aspirations to improve the quality of life of the citizenry.

Besides, billions of dollars have been lost to crude theft and inaccurate production figures. Over the years, Nigeria depended on production figures provided by the oil frms who are contractors to Federal Government. Therefore, it was anticipated that the figures were hugely under-declared resulting in huge revenue loss to the government. On the downstream subsector, following the dysfunctional state of the government-owned refineries, the country depended solely on importation of refined petroleum products for its energy needs. With regulation of pump price of petrol, importation of the commodity solely rested on the government through the NNPC as no private player can import and sell at the regulated price of N145 per litre. To maintain the sale of petrol at the regulated price, the government pays trillions of naira yearly to subsidise imports of petrol.

Also, there have been allegations of irregularities and corruption in the sector, as some unscrupulous importers round-trip their imports and earn double income on a vessel. Some marketers divert trucks of petrol meant for some locations to neighbouring countries for higher prices, which invariably meant that Nigeria subsidises fuel consumed by these neighbours.

These uncomplimentary acts drove away genuine investors but this new development will not only restore investor confidence, it will also engender and enhance transparency and accountability, restore public confidence and hinge the industry’s administration on global best practices.

Tracking oil production, lifting and export

Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, last month, said the Federal Government had begun tracking crude oil production to address crude and products theft, fuel imports and distribution and round-tripping of imported products.

According to him, the technology has been installed and with it, all the tracking and monitoring would be carried out electronically. The technology will monitor vessels lifting oil in the country and their destinations, adding the monitoring would be carried out in conjunction with the Economic and Financial Crimes Commission (EFCC) and other security agencies.

Kachikwu, who spoke at the Nigeria International Petroleum Summit (NIPS) in Abuja, said the tracking would be extended to the downstream sector, and would determine the volume of petrol imported; the quantity of products brought in by each vessel; the depots the commodity would be stored in and to the points of distribution. “The Federal Government has acquired sufficient human and material capacity to closely monitor vessels operating in Nigeria. Lots of irregularities in the oil lifting business have been observed and necessary actions were being taken to address them.

“The data on the activities of movement of vessels would help determine the various loading points of the vessels, the deadweight of the vessels and the volume of crude oil lifted from the country by the vessels. For the first time, Nigeria will know what it produces. As to when it is being produced, barrel to barrel, we can tell. We can see even vessels that are coming into Nigeria and their activities. We have seen some vessels go to a location and pick some cargoes, leave that point, go to another point pick something else and return to the first location, when they should be heading to Port Novo or the United States.

“What we are trying to do with the EFCC is to gather data and track these vessels, to determine the owners? Why did they leave this point? What happened along the way? What is the dead weight of the vessels at the time they were leaving Nigeria and many more? So, for the first time, we will soon be able to tell on a day-by-day basis all the activities that took place in the sector and those of the players. We are even going to extend it to the downstream.”

Computer-based applications unveiled

Kachikwu this month unveiled the process automation, which to him, will create value addition to the nation and accelerate revenue generation for the Federal Government.

To him, most of the problems confronting the industry as well as other sectors were as a result of lack of implementation of the government’s good policies and lack of intra and inter-ministerial collaborations.

Unveiling the series of computer-based applications developed and operated by the Department of Petroleum Resources, the Minister said the approval of President Muhammadu Buhari to steward and supervise a lot of interventions and changes in the oil and gas sector, we have worked collaboratively in the last three and half years.

“The series of computer-based applications will enable us to track volumes of crudes produced from various terminals and how those volumes or products are moved, whether they are going to vessels and where those vessels are going. It is vessel tracking mechanism so that at any given point in time you can tell on real time basis what the country has produced for the very first time in this country.These applications will tell where the vessels have gone to in terms of export and say whether they discharge at the given points. We will also be able to say on forensic basis whether there are some suspicious movements of the vessels when they have products in them. We have also extended it to the downstream sector to capture everything that is brought into this country in terms of importation of refined products and track how they are distributed within the country. So, for the first time in this country, we have holistic IT data-based applications that enable us to do that.

“We also launched the benchmarking system to track expenses and see how we can continue in our process to pull down the cost of producing oil in this country, which is a major challenge for us. Given the oscillating price of oil globally unless we are able to do this, we produce all the oil and make no money out of it. So, this is very helpful to us and we will be able to challenge the oil companies to match the very best practice internally and collectively match the best practices externally in terms of oil pricing. We have explained to you what we have done in terms of early renewals of oil leases and what we generated.”

Benefits of technology

Kachikwu enumerated some of the key achievements the Federal Government made through the automation initiatives and revenue-generation enhancement drive. He listed the National Production Monitoring System (NPMS), Crude Oil and LNG Tracking (COLT), Automated Downstream System (ADS), Value Monitoring and Benchmarking (VMB), Fiscal Payment Administration System (FisPAS), Accelerated Lease Renewal Programme (ALRP), and Royalty Indebtedness Recovery (RIR).

National Production Monitoring System is one of the prominent projects put in place to facilitate the transmission of upstream (oil and gas) production data to the DPR daily. It is a process change for the submission and gathering of oil and gas production data, export data, and other data in the industry that improves on transparency in hydrocarbon accounting in Nigeria and the revenue generated therefrom. It enables accurate hydrocarbon production and export figures monitoring and ensures consistency and quality of data published by the Department of Petroleum Resources. The online gathering of data is achieved through the corporate databases of the oil and gas operations, DPR offices at the terminals and meters installed at Onshore and Offshore Terminals. This project kicked off in 2009 and has since been operational.

“In 2016, the NPMS Platform was expanded and upgraded to enable it to achieve Real-Time Data Gathering and Monitoring of Oil production in active fields in Nigeria. The Department proposed a complete roll out of the real- time upgrade in all 26 oil terminals by mid-2019. Currently, nine terminal locations are successfully transmitting real-time data; the remaining terminals are at various levels of installations and system integrations.

“I stand bold here to tell fellow Nigerians that our daily national crude oil production from nine terminals is captured in real-time across DPR offices via web access,” Kachikwu said.

On the Crude Oil and LNG Tracking, the Minister said come January 2019, Nigeria would be able to account for every molecule of hydrocarbon leaving the country’.

Following the pronouncement, DPR decided to find an excellent and proven system of tracking every vessel and volume of crude oil leaving Nigeria to the spot markets and other parts of the world. After a painstaking search, a Proof of Concept (POF) was carried out by Anchor Specialist in collaboration with KPLER SAS, a company that specialises in using multi-layered satellite feeds and government data-bases with special algorithms to provide intelligence around cargo movement.

This was achieved using Automatic Identification System (AIS) to track Maritime Vessels (ocean- going vessels) carrying commodities, knowing how much volume is being shipped across the globe and by whom, in real-time. The seaborne flows are analysed cargo by cargo revealing hidden patterns and trends in the market which could otherwise go unnoticed.

Crude Oil and LNG Tracking system provide data on vessel operations and movement, which includes, but not limited to loading, cargo details, ship details, destinations (country/continent), discharges and trade activities.

In Kachikwu’s word: ‘’I inform all Nigerians and the whole world that every molecule of crude oil produced in Nigeria, the quantity loaded is known and tracked to final destination including stopovers with applicable discharges. Similarly, information on imported cargos into Nigeria can also be accessed in real time.”

He said the system very interestingly demonstrated the ability to track and identify “Rogue” or “Dark” ships on the real-time map, pointing out that the DPR is keenly interested in tracking and monitoring vessels in the Niger Delta area to deter those that are there without authorisation, or without signals. “I have directed the establishment of an inter-agency forensic team that can investigate further any vessel with suspicious movements in the the country’s territorial waters in collaboration with relevant agencies,” Kachikwu said.

Automated Downstream System is an integrated downstream automation initiative designed to change all internal regulatory processes of licensing and permitting across the value chain to an online system. This is to reduce approval cycle, enhance transparency, eliminate corrupt practices and accelerate ease of doing business. The following systems and processes have already been launched and are all active and available to industry players and public: Coastal Vessel Licensing portal, Lube Blending plants Licensing portal, Retail Outlets Marketing (ROMS) Licensing portal, Industrial Consumers, Filling stations, Kerosene, Crude Oil Export Licensing portal, Hydrocarbon Processing Plants Licensing portal, and Minimum Industry Safety Training for Downstream Operators (MISTDO) Licensing portal.

To enhance operational efficiency and excellence in monitoring downstream operation, Smart Inspector (inspection App) was launched to provide technology enablement for our engineers for inspections and audit processes.

Value Monitoring and Benchmarking is a transparency enablement tool designed to provide cost monitoring platform that will allow benchmarking of upstream cost elements to aid investment decision and national planning. The initiative is hinged on policy aspiration on reducing cost of production in the industry, which has been launched and data upload by industry players has commenced in earnest.

Fiscal Payment Administration System – is an initiative to enhance assessment and collection of revenue streams mainly royalties, concession rental and miscellaneous revenues by industry players. It provides an exchange where revenue payments are reported, reconciliation are done and reporting of payments and receipts is enhanced to facilitate revenue generation for the Federation

Accelerated Lease Renewal Programme This initiative is hinged on the provisions of the Petroleum Act LFN 2004, which mandate the holder of an Oil Mining Lease to apply for the renewal of the lease at leaseone year to the expiration of the lease. Consequently, the DPR views it appropriate to process renewal applications due to expire within the 2016 and 2019 window. This will not only enhance revenue flows to the Federation but will also incentivise investments in the upstream sector by guaranteeing the life of leases critical for green investment decisions considering the long maturation period for exploration and production investments.

A total of 45 assets, which are in international oil companies (IOCs) and NNPC Joint Venture portfolios as well as indigenous operators that fell within the period under reference were identified. It is indeed worth mentioning that more than 25 applications have so far been received, processed through various rigorous statutory regulatory gates and submitted for Ministerial consideration and approval.

It is with much delight and fulfillment that we are reporting that Mr President and Minister of Petroleum Resources has granted approval to the renewal of about 22 Oil Mining Leases (OMLs), which has resulted in the payment of Renewal Bonuses in excess of $1 billion (USD1,141,884,988.75 billion) in addition to the payment of revised application fees of $1 million per block. Some applications are also at various stages of processing for onward transmission to the Minister.

Royalty Indebtedness Recovery

Given the statutory nature of royalty as a first line charge, it was considered expedient to embark on aggressive recovery of all outstanding crude oil and gas sales royalty payments due to the Federation. It is worth mentioning that the current regulatory framework on payment of royalty is hinged on self- assessment and subsequent reconciliation with the DPR based on volume of crude oil produced and volume of gas sold. Several previous attempts by the Department at compelling the debtors to upset their outstandings was greeted with undue interferences and resistance.

Consequently, it was designed to leverage the government’s doggedness, strong political will and lack of interference with processes of public institutions. The initiative seeks to recover legacy crude oil and gas sales royalties’ payments owed by NNPC and mostly indigenous operators prior to 2015. It is our pleasure to state that N1,269,787,561,881.39 have been paid by various debtors and payment plans agreed for progressive settlement. Where a company fails to remit, produced crude seizure has also being approved to upset any outstanding royalty indebtedness.