Pipeline Pandemonium: Vandalism Threatens Nigeria LNG’s Record Dividend

Nigeria LNG Limited is currently experiencing a significant crisis, as only two out of its six production trains are operational due to incidents of pipeline vandalism. This situation has drastically affected gas supply, hindered production capabilities, and poses a threat to the nation’s revenue streams, as well as to Nigeria LNG’s dividends amounting to N727 billion.

The ongoing attacks on pipelines have compelled Nigeria LNG to function at a diminished capacity, leaving four trains inactive. Consequently, Nigeria’s LNG exports have seen a decline of 20% within a mere two weeks, as reported by Bloomberg ship-tracking data.

Philip Mshelbila, the managing director of Nigeria LNG, expressed concern over the repercussions of these attacks, emphasizing the essential role that Nigeria LNG plays in both the national economy and the global energy sector. The company depends on a network of pipelines to transport natural gas from upstream suppliers to its facility on Bonny Island; however, the continuous vandalism and sabotage occurring in the Niger Delta region have significantly restricted gas supplies, thereby impacting scheduled shipments.

Nigeria LNG; what it entails and the impact of vandalism on it.

Nigeria LNG was founded to harness the country’s extensive natural gas resources, focusing on the production of LNG and NGLs for both local use and international markets. The company is a collaborative venture among four principal stakeholders: Nigerian National Petroleum Company Limited (49%), Shell (25.6%), TotalEnergies (15%), and Eni International (10.4%).

The recent reduction in production capacity is expected to have severe consequences, including a significant drop in export revenues and the potential for widespread job losses within the industry.

For many years, the Niger Delta region, which hosts the majority of Nigeria’s oil and gas infrastructure, has faced ongoing security issues. Despite the government’s and private sector’s dedicated efforts to address pipeline vandalism and oil theft, these illegal activities persist.

Could Nigeria be at a crossroad in battling oil theft and vandalism?

Pipeline vandalism and oil theft remain significant issues in the Niger Delta region, despite the Nigeria National Petroleum Company Limited’s (NNPCL) assertions of progress in addressing crude oil theft. In 2024, the NNPCL reported the discovery of thousands of illegal refineries and pipeline connections, with over 300 illegal refineries and approximately 100 illegal pipeline connections identified this year alone.

The ongoing prevalence of these illicit activities is severely impacting Nigeria’s revenue, with the nation losing more than one million barrels of oil each day to theft. The production costs, which range from $21 to $30 per barrel, position Nigeria among the countries with the highest production costs globally.

President Bola Tinubu has set a target to increase oil production from the current 1.5 million barrels per day to 2.06 million bpd. However, experts caution that achieving this target may prove difficult due to the persistent insecurity in the Niger Delta region.

In response to these challenges, the Nigerian government has implemented measures such as the enactment of the Petroleum Industry Act (PIA) in 2021. This legislation aims to promote transparency, good governance, and accountability in the management of Nigeria’s petroleum resources.

 To effectively tackle these issues, Nigeria must enhance its investment in renewable energy and new energy technologies. Additionally, the establishment of a science, technology, and innovation fund could facilitate the development of alternative energy sources in light of climate change and the pursuit of net-zero emissions targets.