01 Apr 2020

‘Nigeria can account for every molecule of oil it produces’

Nigeria is often acclaimed to be unable to account for the oil it produces, as conflicting reports are often released to the public. However, the Department of Petroleum Resources (DPR) Director/CEO, SARKI AUWALU debunks such claims saying several factors determine what is often declared. CLARA NWACHUKWU and FEMI ADEKOYA write.

The industry is often described as opaque. How true is it that we do not know the quantity of oil that is being stolen on daily basis? Are you saying all of that is history?
It is not just history, but deleted. I can tell you that every day, every molecule of oil produced in this country is accounted for. Before I give you the daily production which we put on our website, and every day we update our website on daily production, imports and utilisation just for Nigerians to see. But how do we get that daily production? You cannot produce any oil or gas without technical allowable. Though we manage the resource, you just cannot produce like that and we have to know how much volume you will produce from the reservoir so that you will not harm that reservoir and if you under-produce, you will harm the reservoir. This might even lead to a collapse of the reservoir.

We manage production through what we call Maximum Efficient Rating (MER), and for every well, we check for the efficiency of that well, so that from there, we get the technical allowable and that technical allowable will give every operator to say this is the level we want you to produce. So we have a basis of getting the number, we have the basis of getting the daily volume and production because we know the technical allowable as we know the volume a field will produce; so we tally it and we do that every six months. So we know for the next six months the total technical allowable going forward.

We need to test every well, set the allowable and when we set that allowable the way we produce what we do currently from the well, it goes to the station and from the flow station it goes to the terminal. We have 26 terminals where five out of the 26 are land terminals while the remaining are offshore terminals. We have the national production monitoring system and what this system does is that all these terminals are connected to the system, and we get information right from the control room for each and every terminal and as they get the volume entering the terminal, we are getting same and in addition to validating that, we put a remote access router whereby independent of the volume that goes into their tanks, we have that information being transmitted to us directly to validate the volumes we receive.

So how come the NEITI figures do not tally when they do their audits?
I am telling you how we get the aggregates, and I will come back to NEITI, you see when you aggregate the volume from the terminals, we monitor the exports, know the export quantity. We give the production volume to be produced, we account for the volume that goes into the terminal, and we allow for every molecule that will leave the terminal. So, to us, we have the right figure. But some agencies will say let us account from wellheads, and from wellheads, it is not crude oil, but water, gas and crude oil.

You cannot account for what you cannot sell, and when we get that volume of liquid it is reservoir fluid and you have to treat it and remember each well, after we give the technical allowable which is only DPR that gives the allowable, not any other organisation. So they have to depend on that figure and without that benchmark, you cannot monitor the well and when it produces, you monitor the well so that it will not collapse or shut in on daily basis. When you bring that reservoir fluid, it will go to the flow station where you separate the materials such as water, gas and crude. You grind the crude and send it to the terminal for export.

What we account for is the volume that gets into the terminal because that is where the money comes from and the gas is where we now put flare meter, the gas utilised within, the gas we flare and even the water in MPS we know the water we produce. We account for the water separately, we account for the gas and crude separately as well. Somebody that does not have access to these, I do not think it is possible for the person to get the correct figure and the transparency is that these figures are there and we put it on our website.

How have you fared in monitoring and checking theft volume?
Either way, the responsibility for monitoring is on us constitutionally and legally. With that, I can tell you that the claim that we do not know the volume of what we produce is deleted, neither the one that we do not know the volume we export is deleted, because we sign the export permit and we know the volume. In fact, not only the volume of export, now there is no vessel that will come to carry our crude without us knowing that vessel. We track the vessel, we know the owner and we know where the vessel is going. We have the capacity to monitor the vessels coming into the Nigerian waters. We relate with the Navy to identify idle vessels, and say to them: take that out.

Take any terminal in Nigeria, you will see the production line per second, you will see the tank level per minute, because that is what we do on a daily basis; that is our work, and we also calculate the theft volume, and do you know the theft volume is?In Nigeria, we have trunk lines and we have injectors coming into those trunk lines, and trunk line mainly because all the dry crude that comes to the trunk lines and goes to the terminal for export.

Remember we monitor that allowable, we have expected volume in our mind because we set it, and when we get it from well head and separate the water, we know the volume and when it gets to the fuel station, we know the volume because we set it, and we come to custody transfer, we know the volume, so you subtract that volume from the flow station to the terminal, you will see the difference, and that is the theft volume.

When you follow up these five terminals that are land terminals, you will see punctures where oil thieves are taking and unfortunately, these are gang of criminals with sophisticated weapons and when you engage them in combat, you end up destroying the critical infrastructure, the only thing we are doing now is using technology. There are lots of technologies that we identified that make it practically impossible to tamper and there is even a pipe we discovered in Australia that is bullet-proof, cut-proof and blast-proof, and you cannot drill it.

For oil thieves now, you will see the current volume has gone down and people continue to ask what magic have we done. We realised that those small producers that inject, we give them badging permit and say to them: do not inject but badge it, because it is only when you inject that oil thieves will steal. So, when we started issuing the badging permit, theft volume went down, so we encourage badging and now you see we give badging permits. Also, you cannot steal the badges because it contains huge volume, so we are trying all ways. The Trans-Forcados line was down for 18 months, and only God knows how much the country lost to oil theft, because the oil thieves punctured everywhere in the line and Shell shut it down, and that is when the issue of badging started, and this now gave us alternatives to the trunk lines and it reduced the theft volume.

On the issue of efficiency and transparency which you just talked about, and I know DPR embarked on some initiatives like the Petroleum Resources Intelligent System (PRIS), how will you rate the success of these initiatives?
You know like the saying goes, “Nobody will call you if you do not say your name,” and people will not accuse you stealing from your own pocket. We feel that we have a lot to share, tell and see. We need to rewrite the history of our oil and gas industry. We started way back 1938, searching for hydrocarbon, but we have now grown up to become a Department for Petroleum Resources as we are today. But a lot of people out there either by misunderstanding or misperception or misjudgement or just sheer statement don’t know who we are. So we embarked on automation, knowledge sharing, transparency and efficiency, and we can only do that if we gather data. The petroleum resource intelligent service portal is a portal you can get any information that you need and they are basic information.

You as a Nigerian, you need to know how many wells are in Nigeria, how many production drilling platforms are there, what is the lengths of pipeline in Nigeria. This is not something you have to go deep to get, what that means for you to be a Nigerian with oil and gas production with all these refineries, so that is why we put things together to give information that is reliable and dependable and not necessarily commercial, but provides judgement and avenue for you to come into the industry.

And as we say, we are enablers, because we enable everybody to be in business, NNPC is in business because of our licensing, Shell because they have our licence, Schlumberger carries out their services here because they got our permit, so how that is making sense to you as a Nigerian is why we embarked on the initiative, and you have to be transparent to do this.

Secondly, we developed what we call Electronic Licence and Permitting System (ELPS), we started with the most difficult and that is the service providers, and today if you have a company that wants to do services in the industry at the comfort of your room, you can apply and in 72 hours, you will get your licence. You do not need to come here and you do not need to know anybody, and that gives people confidence. Also, you do not have to come to Nigeria if you are in America, you do it over there and you print.

Another is import, if you want to import anything, you can do that from the comfort of your office, you do not need to come here. For depot management, you do not need to come here, so we make it in such a way that in the interaction between the DPR and the public we deploy technology to make sure that whatever goes in, it is very hard to change. There is no human decision that will bring about non-transparency in the process and we think that really helps a lot, because we have seen a surge in the registration of people, we have seen a surge in revenue compared with when this system was not in place within DPR; we have digitized almost all of our system. We believe this is what will push a good agenda for us to entrench the use of Information Technology, because it improves efficiency, confidence, increases revenue and even the filling stations now it is remote, you do not need to come here.

In the recent time, power supply has been at the lowest ebb; Gencos claim it is due to shortage of gas and gas suppliers say they are not being paid, therefore, they are not compelled to meet their domestic gas obligation. So what is DPR doing to ensure that gas producers meet their domestic gas obligation? We are also talking about gas monetisation, but we find out that a whole lot of companies still choose to flare their gas because it is cheaper for them to flare and nothing is happening?
After 2018, it is no longer cheap for them to flare because gas flare penalty is huge. I am excited that you asked this question on gas, because gas is the future energy because we are a gas province. This country is a gas country and not an oil country. The 200 trillion standard cubic feet (scf) of gas that is proven not probable is unexplored and it is available for 200 million people.

But you know what is happening and as you said the gas producers are doing business and power is not an essential service, but a business and unfortunately, the entire value chain of power, Nigerians take it as social services. The populace feel that the government must provide power and they do not need to pay, and in as much as Nigerians will take power as a social service, that sector will remain the way it is, so the generating companies, transmission companies that transmit the power and the distribution companies are not making any new investment in putting new distribution systems or new transformers to improve the distribution to get more money.

On issues of domestic gas supply obligation (DSO), we initiated here in DPR an audit of DSO, this audit will give us available gas for Nigerians. We identified all the gas flaring sites and talked about flaring, only 11 per cent of gas produced are being flared at the moment. Also, we have Nigerian Gas Flare Commercialisation Programme (NGFCP), whereby we identified the gas flare sites, we put them up for auction, companies get to apply, we qualify them and issue the commercial agreement to all the qualified companies so that they submit their commercial bids. Out of the 96 flare sites identified, already 45 are on auction at present. We did a bidders’ conference and this is the first of its kind in the world, this volume even though it is only 800million scf, it is in the eyes of everybody. What we are pushing now is not gas-to-power, but gas-to-people, and this gas-to-people concept requires everybody that buys energy to survive, you will need to cook and eat, so when we move gas to people, you reduce poverty, create opportunities and you enhance the standard of living of the family because gas is cheaper than firewood. So we want people to get this gas and that is why the Minister of State for Petroleum Resources called this year a year of gas.