In a document posted on its website this week, the Nigerian National Petroleum Corporation (NNPC) is asking investors to bid to fix pipelines and depots serving its oil refineries on a finance and operate basis.
The country's pipeline network was built in the 1970s and plays a critical role in bringing crude oil to NNPC’s three refinery complexes, and moving the finished fuels to consumers.
Over the years, however, the pipeline network has fallen into serious disrepair through normal wear and tear but also from repeated efforts by thieves to tap into the above ground pipelines and siphon off their content, known locally as "oil bunkering." In such cases, the Nigerians involved in these practices process in situ the light and sweet Nigerian crude. The huge profits this brings makes it very difficult for the NNPC to stem, let alone stop, the vandalism.
This project is expected to be operated on a public-private partnership basis as the bidders are expected to finance and execute the project, then operate for an agreed number of years before transferring back to the NNPC. In other words, the bidders for the extensive repairs of these pipelines would have to finance them independently and operate for a defined period in order to recover their investment costs with throughput tariffs.
The great irony for Nigeria is that, despite being Africa's largest oil producer with massive reserves of 37.2 billion barrels (11th largest in the world), the rickety pipeline network and misbegotten attempts to revamp the system have forced the NNPC to import oil. Today NNPC's refineries are nearly totally reliant on foreign oil.
The new pipelines would need “intrusion detection” systems, in addition to deep burial, to stymie theft or vandalism. Submissions are due by Sept. 18.