Nigeria Loses N38.88bn to Oil Spill in 2013

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Article courtesy of | December 23, 2014 |  | Shared as educational material

A new report by Nigeria Natural Resource Charter (NNRC) says Nigeria lost N38.88 billion in 2013 to oil spill in the Niger Delta area.

The report entitled, ‘Benchmarking Exercise Report’, noted that the cost for 2014 may surpass the 2013 report owing to cases of vandalism in the year.

According to the report, the cost of oil spill grew from N12.53 billion in 2011 to N21.48 billion in 2012 and N38.88 billion in 2013. Between 2004 and 2013, the rate of vandalism of pipeline facilities rose from 895 to 3505.

The Nigerian National Petroleum Corporation (NNPC) said that environmentally-costly pipeline breaks remain endemic in the Niger Delta.

The NNRC and Natural Resource Governance Institute (NRGI) are responsible for the implementation of Natural Resource Charter (NRC), a principle which benchmarked the country’s petroleum resources governance against twelve precepts set out by the charter.

The twelve precepts represent the various components of good natural resource sector governance and are mapped to the extractive industry decision chain.

The NRC is a set of principles intended for government and societies, and international community on how best to manage natural resource wealth so that they benefit current and future generations of citizens. The report said the Niger Delta region suffers from environmental damage caused by pipeline sabotage from oil theft and also spills from illegal refineries, noting that poorly maintained, aging pipelines are also a reason behind oil spills as this can result in pipeline ruptures as they corrode.

It said the amount spilled because of oil theft and aging infrastructure and/or operational failures is high and has remained a subject of debate among oil companies and environmental and human rights groups.

The oil spills have caused land, air, and water pollution, severely affecting surrounding villages by decreasing fish stocks and contaminating water supplies and arable land, it noted.

The United Nations Environment Programme (UNEP) released a study on Ogoniland and the extent of environmental damage from more than 50 years of oil production in the region. The study confirmed community concerns regarding oil contamination across land and water resources, stating that the damage is ongoing and estimating that it could take 25 to 30 years to repair.

Also the report stated that the country has lost about N3.8 trillion ($22 billion) to trade mis-invoicing as a result of weak regulation in the oil and gas sector between 2002 and 2011.

Trade mis-invoicing is a method for moving money illicitly across borders which involves deliberately misreporting the value of a commercial transacon an invoice submitted to Customs. A form of trade-based money laundering, trade mis-invoicing is the largest
component of illicit financial outflows measured by Global Financial Integrity.

The report said that extensive revenue has been lost because of weak regulation, citing the situation when contract was signed in 1993 for PSC, industry cost was much more lower than they have been in the last 10 years.

“Investments tax credits (ITC) were given at a 50 percent rate in 1993, and transmitted the wrong signal to petroleum sector investors. To date, the country is yet to overhaul these fundamental components to reflect contemporary market conditions, resulting in revenue loses to the state.”

According to the report, the fiscal policies for petroleum contracts in Nigeria, especially the production sharing contracts (PSC) that govern deep water operations, have failed to ensure that the government receives a rising share of the revenue in the periods of potentially increased profitability.

It stated that this situation is partly caused by the long-term nature of the required investments, as well as different conditions that characterised the markets in the 1990s when the contracts were signed.

“Since the 1990s, an unprecedented rise in the price of crude oil has necessitated a review of all the contracts, but this has failed to take place in a comprehensive way”, the report said.
Source: Business Day Online

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