Militant Attack on Oil Pipelines Causes Power Supply Drops to 2,500MW

Last week, a twin attack occurred on Chevron’s oil and gas facilities in the Escravos area of Delta State, resulted in a drop in power generation from about 3,600 megawatts (MW) to 2,500MW, translating to a loss of 900MW.

Militant Attack on Oil Pipelines Causes Power Supply Drops to 2,500MW
Militant Attack on Oil Pipelines Causes Power Supply Drops to 2,500MW

The attacks, which also led to a slump in the country’s crude oil production to a 20-year low, disrupted Chevron’s gas supply to the domestic market, having stopped the delivery of natural gas to the Escravos Gas Plant (EGP), which processes gas for power generation and other end users.

It was gathered that this has wiped off a substantial part of an estimated two billion cubic feet of gas supplied daily to the domestic market for power generation and industrial uses.

Chevron confirmed that the first attack of last Wednesday night on its valve platform, affected the Okan offshore production platform, thus leading to the shutdown of the facility.

On Thursday night, a pipeline transporting crude oil to Warri and Kaduna refineries and a 16-inch gas line, owned by the Nigerian Gas Company (NGC), the gas transporting arm of the Nigerian National Petroleum Corporation (NNPC), were blown up.

A Chevron source told reporters yesterday that the attacks had hampered the company’s ability to evacuate gas from oil fields into the Escravos Gas Plant for processing.

“Gas from all the oil fields in the entire Escravos area is sent to the gas plant for processing. The plant currently process between 420 million standard cubic feet per day (mmscf/d) of gas and 590mmscf/d. The attacks have disrupted the evacuation of gas into the facility.

“As it is now, domestic gas from Delta State can only come from Utorogu, Ughelli, and Sapele plants for power generation. The ones at Utorogu and Ughelli belong to Shell,” he explained.

Chevron’s Escravos Gas Plant provides gas feedstock to power plants across the country through the Escravos-Lagos pipeline.

The Minister of Power, Works and Housing, Mr. Babatunde Fashola, also told reporters yesterday that power generation had dropped to 2,500MW due to the attacks on the Chevron facilities.

According to him, power generation had averaged 3,600MW before theWednesday and Thursday attacks.

The drop to 3,600MW from about 5,000MW was blamed on the attack on the Forcados terminal pipeline last February. Repairs to that pipeline will be concluded next month, Fashola said.

He decried the spate of attacks on oil installations and their impact on the domestic economy.

“Which country has instances of vandalism on its oil installations like Nigeria? This is economic sabotage, but we will have to evolve a new strategy to deal with this problem. We shall attack it head on,” he said.

However, daily operational reports obtained from the Nigerian electricity system operator showed that generation as at 6 am yesterday was 2,474.10MW, down from the peak generation of 2,968.9MW recorded on Saturday.

The lowest generation on Saturday, according to the operational report, was 2,160.3MW.

The attacks have also pushed Nigeria’s crude oil production to the lowest in 20 years, as Chevron also shut down about 90,000 barrels a day of output following the impact on a joint-venture offshore platform that serves as a gathering point for production from several fields.

Even before that strike on Wednesday night, Nigerian oil production had fallen below 1.7 million barrels a day for the first time since 1994, according to data compiled byBloomberg.

The Minister of State for Petroleum, Dr. Ibe Kachikwu, had confirmed that Nigeria would be producing 2.3 million barrels per day, up from 2.18 million bpd, but for the February attack on the Forcados pipeline.

Nigeria’s crude oil production had peaked at 2.6 million bpd in January 2013 before it was plagued by renewed militancy, oil theft and vandalism.

The significant drop in power generation, notwithstanding, electricity distribution companies (Discos) in the country are poised for a showdown with their historic debtors with the possibility of mass disconnections in the days ahead.

The Discos for months have been hamstrung by severe liquidity constraints arising from unpaid utility bills by residential, commercial, industrial and government establishments across the three tiers of government.

Military and security agencies are also guilty of huge indebtedness to the distribution companies.

The Executive Director, Association of Nigerian Electricity Distributors (ANED), the umbrella body of the 11 Discos, Mr. Sunday Oduntan, disclosed at the weekend that at the end of April, the total indebtedness of MDAs, military and security agencies inclusive, stood at approximately N93 billion.

The figure comprises N39.1 billion pre-privatisation of the electricity assets and N39.5billion post-privatisation, as well as an outstanding interest of N15 billion, which the Bulk Trader charges Discos for late payment of their energy bills arising from the non-settlement of utility bills.

A breakdown of this huge sum is as follows: Abuja DISCO – N18.6 billion; Eko DISCO – N8.6 billion; Kaduna – N8.2 billion; Enugu – N7.2 billion; Ibadan – N6.8 billion; Ikeja – N5.9 billion; Port Harcourt – N6.8 billion; Benin – N5.8 billion; Jos-N6.5 billion; Yola – N2.4 billion; and Kano – N1.2 billion.

Last October, the Discos together with the National Electricity Regulatory Agency (NERC), Nigerian Bulk Electricity Trader (NBET), and electricity generating firms met with Vice-President Yemi Osinbajo, where a modality for the settlement of outstanding receivables from the government agencies was worked out.

Under the agreement, the federal government was to work on deducting the outstanding receivables for utility bills of approximately N71.6 billion from source.

Based on this agreement, NERC deducted the outstanding receivables of the government from the collection loss component of the sculpted tariff, resulting in the revenue shortfall, which the entire industry value chain is suffering from and has been exacerbated by the government not honouring its obligations to the electricity industry.

Oduntan noted that having been cash-strapped and further squeezed of working capital by the resistance that has greeted the new electricity tariff structure, the distribution companies’ predicament has been made more precarious by the refusal by these historic debtors, particularly the MDAs to pay for electricity consumed.

This, according to him, informed the decision of the Discos to publish through advertisements, the schedule of chronic debtors including the ultimatum within which they should pay up or face imminent mass disconnections.

Sources close to the Discos said they are determined to carry out the threat unless the issue is resolved by the authorities.

Some of the Discos that have started publishing the names of their historic debtors include Benin Disco.

Oduntan said ANED was still working with the Office of the Vice-President to resolve the issue in the interest of all stakeholders.

He disclosed that the Office of the Vice-President had come up with a new template which all Discos are expected to adopt and would state in clear terms what each ministry, department and agency owes to guide the vice-president’s office in the resolution of the debt crisis.

By last Friday, all the Discos had submitted their claims using the new template.

Oduntan said that although his association believes in the ability of the vice-president’s office to resolve this long drawn debt crisis, his members are very serious about their threat to embark on mass disconnections in the days ahead if the debtors refuse to honour their obligations.