Oil theft continues thrive in Nigeria despite efforts being made by government and stakeholders to address the menace that has deprived the country of billions of dollars in revenue; BENJAMIN UMUTEME reports.
Over the years, oil theft has been thriving in the Niger Delta region of Nigeria; it is considered to be the illegal appropriation of crude or refined oil products from the pipelines of multinational oil companies.
Over time, this economic crime has been facilitated by the extensive connivance of security forces, militia organisations, the local population, and oil company employees who use a variety of methods to steal oil from the multinational oil corporations that are stationed within the country.
Currently, Exxon Mobil, Chevron, Statoil, Shell, and Agip are the five largest multinational oil companies present in Nigeria. But due to lack of federal oversight and a large network of corruption, oil theft is primarily cellular rather than hierarchical and requires frequent collaboration between varieties of random players depending on the level of theft that is committed.
Each group maintains a specific role in the oil theft trade. These key players use methods such as hot-tapping and cold-tapping to perform oil bunkering and steal thousands of barrels of oil per day from established oil pipelines. In addition to stealing oil from the pipelines, oil theft can also occur during the transportation of the crude oil product to the oil shipping terminals for export.
In its June monthly report, the Nigerian National Petroleum Corporation (NNPC) stated that there was a 77 per cent rise in oil pipeline vandalism. The state oil corporation stated that there were 106 pipeline breaches in June, up from just 60 in May.
And in line with that, the Nigeria Extractive Industry Transparency Initiative (NEITI), in its Policy Brief released in November 2019, disclosed that the country lost $41.9 billion to oil and product losses, including other social and environmental challenges associated with illicit activities of oil thieves between 2009 and 2018.
The NEITI report
A breakdown of the report, titled “Stemming the Increasing Cost of Oil Theft to Nigeria” Policy Brief contains graphic information and data on the cost of oil theft to the country showed that the nation lost $38.5 billion on crude theft alone, $1.56 billion on domestic crude and another $1.8 billion on refined petroleum products between 2009 and 2018.
The Agency further expressed concerns that in the face of current dwindling revenues, paying priority attention to curb oil theft in the country’s oil and gas industry has become both necessary and urgent to expand revenue generation.
The NEITI report further disclosed that Nigeria loses an average of $11 million daily which translates to $349 Million in a month and about $4.2Billion annually to crude and product losses arising from stealing, process lapses and pipeline vandalism.
“While figures from government put the loss at between 150,000-250,000 bpd, data from private studies estimate the figure to be between 200,000-400,000 bpd. This implies that Nigeria may be losing up to a fifth of its daily crude oil production to oil thieves and pipeline vandals,” the report stated.
On comparative analysis of the size and implication of the losses to the country’s current dwindling revenue profile, NEITI renewed its appeal to the government to curb oil theft to reduce budget deficits and external borrowing.
The transparency agency stated that the value of crude oil and allied products so far lost are equal to the size of Nigeria’s entire foreign reserves.
“Stemming this haemorrhage and leakages should be an urgent priority for Nigeria at a time of dwindling revenues and increasing needs.”
According to the NEITI report, what the country lost in 20 months in fiscal terms is “Enough to finance the proposed budget deficit for 2020; in 15 months to cover total proposed borrowing or increase capital budget by 100 per cent and in five months to cover pensions, gratuities, and retirees’ benefits for 2020.”
It further stated that: “In terms of volume, 138.000 barrels of crude oil was lost every day for the past 10 years, representing 7 per cent of average production of two million bpd. Nigeria lost more than 505 million barrels of crude oil and 4.2 billion litres of petroleum products between 2009 and 2018. What is stolen, spilled or shut-in represents lost revenue, which ultimately translates to services that government, cannot provide for citizens already in dire need of critical public goods.”
The report also identified other effects of oil theft to the nation to include: pipeline vandalism, criminal sabotage, illegal refineries in oil-producing communities, which threatens the safety and livelihoods of the environment where these illegal refineries operate.
Security personnel’s involvement
According to a report from the foreign affairs think-tank Chatham House, oil is being stolen not just from pipelines but from tank farms, export terminals, refinery storage tanks, jetties, ports, pipelines, and wellheads. “Officials and private actors disguise theft through manipulation of meters and shipping documents. Proceeds are laundered through world financial centres and used to buy assets in and outside Nigeria, polluting markets and financial institutions overseas, and creating reputational, political and legal hazards,” it says.
Much of the stolen oil is exported to foreign refineries or storage facilities, says the report, including buyers in West Africa, the US, Brazil, China, Singapore, Thailand, Indonesia, and the Balkans. The proceeds appear to be laundered through banks and other channels in various African countries, Dubai, Indonesia, India, Singapore, the US, the UK, and Switzerland.
The scale of the “bunkering” has shocked observers. Thirty centimetres pipelines able to transport thousands of barrels of oil a day have been found leading straight from pipelines into the swamps. The Nigerian Navy had to sack two admirals for their role in the disappearance of a tanker that had been seized for transporting 11,000 tonnes of stolen crude.
“A lot of big-time stealing goes on. You know the oil you are offered is stolen,” says one oil trader in Port Harcourt who asks to remain anonymous.
“They give it to you without documents at a cheaper rate. I was offered 50,000 litres today for N55 (20p) a litre. But N75 is the cheapest you can get it from the government. You know it’s a racket. There is no chance of getting caught because there is no system to catch people. Big business is big politics.”
Yet to be proven, the Nigerian military has allegedly become deeply implicated in oil theft since an amnesty was declared with militants two years ago. “The military now controls the oil platforms, not the militants. People now have to buy oil directly from the military. The military is a chain of command, so I can only assume this goes to the very top. Oil theft used to be about people breaking into pipes. That is not happening any more. If I want to load 200 tonnes of crude, I would have to pay for a lot of security. It is far easier to go straight to the military.”
Solution
At an oil and gas stakeholders’ meeting recently, participants called for a sustainable solution to the scourge of oil theft which has left the country bleeding.
Speaking, the Edo state governor and chairman of the National Economic Council’s Committee on Crude Oil Theft, Prevention and Control, Mr. Godwin Obaseki, said the oil industry must find ways to end prevailing incentives that make it possible for crude oil theft and pipeline vandalism to flourish.
On his part, the Minister of State for Petroleum Resources, Mr. Timipre Sylva, disclosed that in addition to its huge negative security implications on the country, oil theft had caused difficulty in operating environment, high cost of production and assets divestment by some companies.
Sylva, who was represented by the special adviser on Niger Delta, Felix Bob-Nabena, noted that despite sophistication of weapons committed to ending the incidences, government would continue to review current efforts to end oil theft in the country.
In his presentation, NEITI’s executive secretary, Waziri Adio, identified active markets for stolen crude and products; low cost and high incentive for oil theft; weak measurement and surveillance mechanism; weak and inadequate sanction as part of reasons why illicit business of oil theft lingers in Nigeria.
He called for deployment of appropriate technology, diplomatic and global partnership, and multi-sectoral approach to stem the menace of oil theft in the country.
In his contribution, the group managing director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, described the high spate oil theft in the country as “a threat to national economy,” given the critical role of oil and gas revenues to the country.
Kyari, who was represented by the NNPC’s chief operating officer, Upstream, Roland Ewubare, listed other measures to curb the menace to include improved security architecture with single accountability for national critical infrastructure.
“NNPC as a player in the downstream sector has felt direct brunt of the attacks on our facilities and assets. Between 2001 and 2019, we recorded a total of 45,347 pipeline breaks and breeches on our downstream pipeline network,” he said.
Not leaving the issue to fate, Shell Petroleum Development Company (SPDC) has resolved to deployed state-of-the-art high definition cameras to track vandalism of its assets.
As the worst hit of all the oil exploration companies in the country, Shell says “cameras will be attached to specialised helicopters which carry out daily over-flight over it facilities,” adding that “this measure has improved the surveillance of assets.”
According to its spokesperson, Igho Weli, “We collaborate with community leaders, traditional rulers, civil societies and state governments in the Niger Delta to implement several initiatives and partnerships to raise awareness on the negative impact of crude oil theft and illegal oil refining.”
For his part, the chief executive officer (CEO) of Umugini Pipeline Infrastructure Limited (UPIL), Blessing Ayemhere, suggested that the country should create alternative operation routes, secure the evacuation routes and expand export activities to the eastern side of the Niger Delta to contain crude oil theft.
According to him, the government should conclude the crude tracking process so it can be fully operational and complement the current strategy used by UPIL, insisting that the menace was a huge challenge for operators in the sector, and they were trying multiple strategies to stop it.
He said: “Vandalism in the oil and gas sector has become a big deal. Aside from the well heads, we also have vandalism of the pipelines along the right of ways.
“So, we are combating such occurrences from time to time. It is something that operates in the system, and what we are doing is to put multiple strategies in place to safeguard the pipelines and the products.
“The crude tracking technology has not fully come to effect but every crude has its specific identity. What we do right now is to ensure that the pipelines we use are tracked and we are alerted if there is an intrusion or any other issue.
“Once we are able to mature as a country to track our crude specifically, then, that would be the next phase. The solution is to create alternative operation routes, secure the evacuation routes and also expand beyond the western side to the eastern side of the Niger Delta.”
NEITI suggests that the government should reconstitute a special security task team for Nigeria’s oil and gas assets, with a specific mandate to minimise crude theft and vandalism.
“This task team should include oil companies and technical expertise in relevant fields. Command and control responsibility should be manned by professional intelligence personnel. The key mode of operation should be based on seamless communication to improve response time. The command and control should have direct real-time access to information produced by the leak detection and localisation systems installed and operated by the oil companies.”
