Nigeria Report: Native firms bear the risk of unusable pipeline

Posted by Bayo Okoya - Delta Analytics Lagos


Nigeria's crucial Forcados pipeline remains offline following attacks in early January, forcing indigenous Nigerian firms to transport crude using an increasingly expensive and dangerous means: over water.

Forcados, which is majority owned by Royal Dutch Shell, remains offline following militant attacks at the start of 2017. The pipeline is a major artery for the Nigerian oil industry, depended upon by a huge numerous of indigenous Nigerian firms, who the Federal Government have gone to pains to support despite the global downturn in the price of crude. Without the use of this major pipeline an increasing number of these cash-strapped local firms are turning to barges and other small vessels to transfer tens of thousands of barrels over water directly from wellheads to other terminals, as reported by London's Financial Times earlier this week. Even the Nigerian National Petroleum Company (NNPC) are reportedly seeking out water-borne routes, revealing the extent of the desperation.

Indigenous Nigerian firms control the majority of onshore oil sites, which make up a third of Nigeria's total output. Transferring oil using the rivers of the Western Delta has no upsides when compared with pipeline transport. The volumes transported are smaller, it takes twice the time to load the same volume and costs four times as much. One executive claimed to be able to transfer 15 times less than he could when Forcados was operational.
The associated risks of this quick fix are also deeply concerning. The environmental dangers of transferring such large volumes of oil on water are obvious – thousands and thousands of barrels per day transferred via creeks on amateur barges, as well as along the coast according to some industry experts.  But there are also concerns that these methods of transportation are more prone to militant attacks, with exacerbated human and environmental costs to those on the vessels and the waters on which oil is being transported.

The moves come as indigenous firms, desperately trying to take advantage of a global oil price which hovers above $50 a barrel, try to work around the absence of the vital Forcados pipeline. It comes at a time when Royal Dutch Shell's track record in Nigeria is looking increasingly unsanitary. They are currently embroiled in one of the biggest corruption cases in the country's history, regarding its acquisition of oil exploration licence called OPL 245 in 2002, for which over $1 billion dollars is alleged to have passed into pockets of politicians and officials.

Now their inability to get Forcados up and running again, despite over three months since the last militant attack, is serving to tighten the noose around indigenous oil firms, who are now turning to dangerous and costly transportation means. Repairing Forcados is an opportunity for Royal Dutch Shell to reaffirm its waning commitment to Nigeria. Failing to do so will only pile more trouble at its doorstep.

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