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FG to install new flow meters, take over production data from oil firms

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The Federal Government announced Monday 5th September 2022 that it would start installing its own flow meters on oil production facilities and pipelines in the upstream sector, in contrast to the current practice where Nigeria depends on operators for production data to estimate daily volume and oil revenues. President Muhammadu Buhari has given his approval to the initiative, which is projected to save the country billions of dollars in revenue losses due to incorrect meters and reliance on oil companies for data even though the country has constantly relied on their data.

The NUPRC Chief Executive Officer, Gbenga Komolafe, confirmed that, despite previous debunkings of the notion that Nigeria is oblivious of its daily oil production, the country does in fact rely on operator-provided data rather than the regulator collecting its own information from installed meters. This confirms claims that some oil producing firms may have been shortchanging the country for many years, just as Komolafe noted that earnings lost to such activities run into billions of dollars. Nigeria has lost billions of dollars in potential income due to underreported volumes since it is reliant on operator data and does not know how much is produced from its reservoirs. Recall that some operators are still contending in court over reported volumes from flow meters that were inaccurate and even conflicting in the same export pipeline. Additionally, the regulator stated that discussions with the owners of shut-in wells are currently taking place in order to reactivate at least 800,000 barrels per day of shut-in production from the wells by the end of this quarter. The NUPRC had expressed concerns about the country’s production capacity, citing cases of deliberate shut-in of oil wells and pipelines by operators, who are trying to deal with theft. Indeed, Komolafe had stated that the level of theft had caused the Bonny Oil & Gas Terminal (BOGT) to declare a state of force majeure and shut-in wells from fields that were evacuating via the Nembe Creek Trunk Line (NCTL) and the Trans Niger Pipeline (TNP), noting that a similar trend had continued in 2022. The upstream regulator in a chat with The Guardian at the ongoing GASTECH exhibition and conference in Milan, Italy added that the procurement process has almost been finalized as original equipment manufacturers (OEMs) have been engaged, while a forensic audit of all flow stations and production volume is underway. The regulator is looking at all available options to generate income and ensure that the oil sector becomes financially viable for investment at a time when the country is suffering from numerous setbacks on all fronts, particularly in the areas of oil theft, underproduction, and heavy subsidy burden.

The New flow meter initiative will help account for Nigeria’s daily oil production volume as well as save the country billions of dollars in revenue losses. It is not projected however to affect the prices of AGO/MGO

Source:  The Guardian, Etleboro

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