. Pays workers N266b in 16 months
The burden of insecurity is telling on the profitability of oil companies in Nigeria amidst struggling oil production and dwindling foreign direct investment with the Nigerian National Petroleum Company Limited (NNPCL) spending a whopping N267.98 billion on security in 16 months.
As insecurity goes from bad to worse in the country with most oil companies already issuing security guidelines to workers, there are indications that international oil companies and independent firms may have their production hampered over escalating security burden and budget.
The development, already fueling an upward swing in the cost of oil production in the country, may cripple the country’s crude oil production benchmark in the 2024 budget.
Besides the N267.98 billion spent by the national oil companies on security, the 16-month audited statement of the company showed that NNPC spent about N266 billion on staff salaries.
By implication, the national oil company spent about N534 billion on security and salary. This is about 21 per cent of the N2.5 trillion profit it declared for the year 2022.
The figure is also about 90 per cent of its N674 billion profit declared in the year 2021 while nearing almost half of the budget for education in the 2024 budget.
While the NNPC had said its wars against insecurity led to the shutdown of over 4,090 illegal refineries, most operators said insecurity has not only stalled some projects but caused over 90 per cent loss of oil production.
Although there were indications that Nigeria might have increased its oil production to 1.5 million bpd in January, as revealed by oil shipping data tracked by Reuters, meeting that budget benchmark of 1.78 billion bpd remains a mirage.
Kyari had said: “In our country today, when businesses come here from other countries, they know what would cost $100 in one country; you probably want to add another $30 in this country.
“This is because they think that the risks of exposure to these assets are very high. Secondly, there must be a fiscal environment that supports it. This means that our laws, business of taxation, collection of government dividends from the business, in any form, whether taxes, royalties, company income tax, companies will always sum it up for them to say, “Do I put $100 in this country?”
At a time when most oil companies are already divesting due to security-related concerns, the Minister of State for Petroleum Resources stated that only about five per cent of foreign direct investment is coming into the oil sector in Nigeria.
Coupled with climate issues, Nigeria has in recent years seen $21 billion worth of assets divested even as the country’s total yearly upstream capital expenditure nosedived from $27 billion in 2014 to less than $6 billion in 2022, marking a 74 per cent decline.
Chairman of the Society of Petroleum Engineers Nigeria Council, Felix Obike, had said while Nigeria is exploring, “a lot of companies are not transporting their crude oil for exports due to insecurity challenges disturbing movement of oil.”
Earlier, the Independent Petroleum Producers Group (IPPG) had stated that almost 90 per cent of crude oil output is lost before getting to the export terminal due to insecurity challenges.