By Gideon Osaka
On the faithful night of April 22, 2022, the entire 16 villages of Egbema in the oil-bearing area of Imo State were thrown into mourning over the death of family members in an explosion that rocked the communities. The ugly incident which occurred around 11 pm at an illegal oil bunkering site situated at Abezi and its neighbouring Okwuzi village in the Ohaji-Egbema local government area, terminated over 100 people’s lives.
The practice of illegal dealing in crude has turned out to be lucrative business for some youths of the oil-producing localities despite the deadly consequences. Crude oil is tapped from a web of pipelines owned by major oil companies and refined into products in makeshift tanks. Investigation reveals that people came from different parts of the country to buy the illegal product in the communities.
The hazardous process has led to many fatal accidents and has polluted large swathe of the Niger Delta region already blighted by oil spills in farmland, creeks and lagoons.
In this unfortunate incident, which is the most recent, several vehicles that were in a queue to buy illegal fuel were burnt in the Egbema explosion.
In February, local authorities said they had started a crackdown at the border location, Rivers State to try put a stop to the refining of stolen crude, but with little apparent success. In October last year, at least 25 people, including children, were killed in an explosion and fire that rocked another illegal refinery in Rivers state. The incessant attacks on oil facilities and the mind-blowing figures of attendant losses in oil revenue has gained national prominence recently with key operators in the industry warning that the country risk a major economic disaster if the situation was not arrested.
Although, crude oil theft is not new in Nigeria as the phenomenon dates back to the 80s, however, discussions surrounding the phenomenon gained national prominence early last month. What is different now is the sheer volume and value of crude oil lost to non-state actors and the manner the situation has skyrocketed.
With active connivance of security personnel, community actors and even with the endorsement of top government officials, the menace is not only threatening the Nigerian economy, but has imperiled the operations of local and international companies in the sector.
With the massive theft reported by the operators, Nigeria has been unable to improve its oil production volume to meet its prescribed Organisation of Petroleum Exporting Countries (OPEC) quota of 1.8 million barrels per day or even benefit from the high crude prices.
The troubling numbers
In 2019, the Natural Resource Charter revealed that the highest ever reported crude oil theft in the world took place in Nigeria with the country recording approximately 400,000 barrels per day (bpd) crude theft. The NNRC report, which was an aftermath of a survey on oil theft in the world, showed that Nigeria’s loses around 10 per cent of its annual budget to crude oil theft.
Like the researchers warned that the trend could continue unabated because policies on theft were not enough to deter oil thieves, oil theft in Nigeria has not abated till date, in fact, it has been perennial and unceasing and indeed, getting worse by the year.
Wood McKenzie, a global mining and consultancy research group, in its latest report released in April said that the oil theft challenge in the country has gone beyond a crisis point. The firm in the report titled: “Nigeria Suffers Record Levels of Oil Theft,” noted that the problem was scaring investors from the sector, adding that for instance, Shell reported about 107 sabotage incidents in 2021 alone.
“Oil thefts have gone beyond crisis point and are deterring investment in the onshore. Crude theft and sabotage have long been problems in Nigeria, but 2021 saw record levels of theft. NNPC reports that crude thefts in 2021 reached 200,000 barrels per day a quarter of onshore production,” the report highlighted.
The seriousness of the situation was underscored by the declaration of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in March 2022 that the total value of Nigeria’s crude oil stolen between January 2021 and February 2022 was about $3.27billion (representing N1.361trillion at the official exchange rate of N416.25 to the dollar). According to the upstream industry regulator, the country loses more than 115,000 barrels per day to oil theft and vandalism.
A former Executive Secretary of the Nigerian Extractive Industries Transparency Initiative (NEITI), Waziri Adio, speaking on the matter recently, stressed that since Nigeria first reported oil losses, in a period of 10 years, an analysis by NEITI put losses to oil theft at $41.9 billion, about $4.1 billion per year. He said aside its economic implications, the losses also had security ramifications. “We have never had it this bad. Something really is going on. The enforcement of the law is very weak, the surveillance mechanism is weak, the security apparatus is also not clearly focused”.
In the last couple of months, due to its inability to ramp up production, despite growing international oil price, NNPC was only able to contribute N14 billion, N10.5 billion, and N20 billion, respectively, to the federation account, although it projected N209 billion monthly.
Operators, government sweat over losses
The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, in March, conveyed the fears of members of the Monetary Policy Committee (MPC) to the fact that the Nigerian economy was hemorrhaging due to the activities of a well-coordinated oil bunkering syndicate which was making a kill from crude oil diversion.
While speaking on the decision of the MPC after its 284th meeting, Emefiele, disclosed that the country was unable to meet its production quota due to unwarranted oil theft in the sector.
“Apart from the Russia-Ukraine war, crude prices have increased due to supply shortage and of course, for Nigeria, we have not been able to meet the export quota primarily because of unwarranted oil theft that we see in our environment today. This has increased in the price of diesel and petrol,” Emefiele said.
Lamenting the huge hole, activities of oil thieves was digging in his company’s revenue, Chairman of Heirs Holdings, Tony Elumelu, said Heirs Oil and Gas, was losing as much as 50,000 barrels of crude oil to criminals daily. Speaking during a lecture he delivered in February to members of Course 30 of the National Defence College on the theme, “Strategic Leadership: My Business Experience,” Elumelu described the situation as a national disgrace.
“We produce sometimes about 87,000 barrels per day, thieves take 50,000 per day and, to me, this requires a national seminar or dialogue,” he stated.
“In my view, it is one of the highest levels of threat to our country because it’s so much money in the hands of people who don’t pay tax, people we don’t regulate, the country is not safe. They do that to us; they do that to other operators also.”
According to the Wood McKenzie April research, ND Western reported 300 theft points on a 12-kilometre section of pipeline in 2021 around OML 34, while Shell declared force majeure at Forcados in August and December last year. It disclosed that Eni’s Brass oil pipelines in the northern areas are now worst affected, while local security officials contend with an unprecedented number of incidents.
Although Chevron’s Excravos network is mostly offshore and not so vulnerable, it noted that the southern swamp community dispute shut in 8.8kpd in December 2021 while 50 per cent of liquids production now comes from offshore, which offers some form of protection.
Former Chief Executive Officer of indigenous oil company, Seplat Energy Plc, Austin Avuru, said 80 per cent of oil injected in some pipelines is stolen before getting to the export terminal. Avuru, in a report, titled “Reining in the Collapse of the Nigerian Oil Industry” published by the Africa Oil+Gas Report, called for a state of emergency in the Nigerian oil and gas sector.
“With eyes fixed on divestments and exit, the IOCs have not made any meaningful investments in the last fifteen years,” he said.
“The result has not just been declining production. Much worse, the entire export pipeline network has been surrendered to vandals and illegal bunkers.
“There are some pipeline systems now (particularly in the East), where 80% (eighty per cent) of production injected therein does not make it to the terminal!”
According to him, almost every producer is now cooking up “alternative evacuation” schemes that cost four to five times what pipeline export would normally cost!
“The stark reality today is that the IOCs are leaving. Their decision to leave is outside our control as a nation. In fact, over the last twelve years, Shell and Chevron have divested from a total of twenty-one blocks. It is public knowledge that Shell and ExxonMobil are now exiting the onshore/shallow water altogether,” he said.
“In fact, my projection is that, by Christmas day of 2025, Total would be the only IOC in joint venture (J.V) with NNPC.
“Oil production is down to about 1.4 million barrels per day and declining and this includes about 600,000BOPD from the deep water.”
Avuru added that the full impact of the current oil production level can only be imagined when oil prices return to the $60 per barrel level.
Recently, Aiteo Eastern Exploration and Production Company (AEEPCO), operators of the Nembe Creek Trunk Line (NCTL) pipeline, threatened to exit the facility due to incessant vandalism, perennial sabotage and outright theft.
The company stated: “All our current efforts to sustain and increase crude production are being aggressively undermined, even wiped out by the activities of economic saboteurs whose audacity continues to be growing by the day.”
An Economist and Founder of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, had alerted the federal government that unchecked crude oil theft among other vices may wipe out the government’s expected revenue of N10.7 trillion in 2022 and plunge the country into bankruptcy.
More probe panels, security operations
In recent time, there have been lots of panels and special security forces operations in the Niger Delta region to curtail the activities of oil thieves. However, there is little result to justify the billions of naira committed to the cause.
With the phenomenon getting broader interests including that of President Muhammadu Buhari who doubles as the Minister of Petroleum, could there be hope that the scourge might be curtailed soon?
Dissatisfied with the rising complaints, President Buhari recently deployed the Group Managing Director of the Nigerian National Petroleum Company (NNPC), Mallam Mele Kyari, to the Niger Delta to assess and put a final stop to the problem.
Speaking during an on-the-spot assessment of some areas in the Niger Delta region, Kyari stated that the government had concluded plans to move against illegal activities threatening the country’s oil sector.
He noted that the government would leave no stone unturned to arrest the increasing spate of oil theft and destruction of the environment which had cost the country foreign exchange earnings.
The NNPC CEO stressed that no stakeholders will be left out in the quest to find a lasting solution, adding that the Navy were also on top of the situation.
Also in an apparent response to the danger signal, the regulatory body in charge of the upstream sector, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), in March set up a panel of experts to audit the activities of oil companies in the upstream petroleum industry in the last two years to ascertain the actual volume of crude oil stolen by vandals, pointing out that the audit became necessary following allegations by some industry players about the high rate of oil theft in the sector, which had prevented Nigeria from meeting its production quota as approved by OPEC.
According to the Chief Executive Officer of the NUPRC, Engr. Gbenga Komolafe the panel will thoroughly audit the activities of operators in the upstream petroleum industry in the last two years. This is to ascertain the actual volume of crude oil stolen by vandals and saboteurs against recent allegations by some industry operators regarding the volume of crude stolen on a daily basis from their operations.
He said: “While a stakeholders’ meeting has been called to discuss the matter with a view to jointly addressing the situation, the Commission, at a meeting of its management meeting, activated its technical and commercial mandate to demand for the statement of financial accounts of the operators and reservoir accounts of productive oil wells for the last two years. This will entail both sales audit and reservoir audit to establish correlations between their technical and commercial activities vis-a-vis the monitoring and evaluation records available to regulatory agencies.”
To curb the growing oil theft, illegal refining and vandalism in the country, the Nigerian military recently launched an operation codenamed ‘’Octopus Grip’’ in the Niger Delta. The operation expected to last 90 days, is expected to curb the activities of oil thieves drastically and assure the integrity of oil and gas installations and facilities.
The Nigerian Navy on its part in April 1, 2022 launched the Operation DAKATAR DA BARAWO, to check increasing crude oil theft and related acts of economic sabotage. The operation which the navy recently said has been successful has led to the seizure of 6 million litres of stolen crude oil estimated at N264 billion.
Also, following public outrage against the massive stealing of Nigeria’s crude oil, which had seen the country lose huge earnings as well as hobbled its ability to meet the quota allocated by OPEC, the President of the Senate, Ahmad Lawan, recently constituted a 13-member Adhoc Committee to investigate oil theft with the Adhoc Committee given one month to conclude work on investigations and report back to the chamber in plenary.
A former Group General Manager in charge of Research and Development division at the Nigerian National Petroleum Company Ltd., (NNPC), Mr. Benjamin Obaigbena, called on the federal government to deploy technology in solving the perennial theft of the nation’s crude oil.
Making his views known in a treatise, the ex-NNPC top shot estimated that Nigeria would have saved as much as $20 billion if it had deployed technology when the problem started years ago.
He expressed surprise that Nigeria has just woken up from what he described as its heavy inertia to know that the country is losing substantial volume of crude oil to oil theft and bunkering, insisting that the activities of the criminals are as old as the oil industry.
