No Let Off in Crude Oil Theft

Crude oil theft continues in spite of the much-trumpeted efforts of the federal government to curb it

By Anayo Ezugwu  |  Oct. 28, 2013 @ 01:00 GMT

DESPITE government’s efforts to curb crude oil theft and pipeline vandalism in the country, the activities are on the increase. Shell Petroleum Development Company of Nigeria, SPDC, on October 11, raised the alarm over the increasing trend of crude oil theft which has resulted in the deferment of up to 300,000 barrels of crude oil per day. Shell on October 10, declared a force majeure on Bonny Light exports owing to production deferment from leaks observed on the Trans Niger Pipeline, TNP, at B-Dere, Nonwa–Tai and Bodo West, in Niger Delta.

A joint investigation conducted by the regulators, SPDC and members of the community, discovered that the spill at B-Dere was caused by unknown persons who drilled holes on the line. Similar investigation visits are being organised for Nonwa –Tai and Bodo West. The entire TNP system, comprising the 24-inch and 28-inch has been closed down at least five times since early July this year owing to multiple leaks from crude theft connections. The downstream section of Nembe Creek Trunkline, NCTL between San Barth and Bonny was reopened on August 6, after the removal of 60 crude theft points, but was shut again in September with the discovery of seven additional connections. Repair of the line is progressing.

President Jonathan
President Jonathan

Mutiu Sunmonu, managing director and country chair, Shell companies in Nigeria, said a total of 189 crude theft points had been repaired on the TNP and NCTL between January and September this year. “We’re dealing with a social tragedy, an environmental crisis and a sad waste of resources. We find it difficult to safely operate our pipelines without having to shut them frequently to prevent leaks from illegal connections impacting on the environment. Ironically, it appears that the crude thieves use repair windows to prepare and quickly launch fresh illegal connections when we restart production. While SPDC continues to play its part in combating crude oil theft by, amongst other things, increasing surveillance of pipelines and organising daily helicopter over-flights of pipeline routes, the experience of the past few months requires more concerted efforts by all stakeholders, including government and communities, to address what is turning out to be a dangerous development in the Niger Delta,” he said.

Besides, a recent report released by Chatham House, a London-based research group, showed that Nigeria’s crude oil is being stolen on an industrial scale. Chatham House said the country lost at least 100,000 barrels of crude oil per day, about five percent of Nigeria’s total output, in the first quarter of 2013, to crude oil theft from its onshore and swamp operations alone.

The Chatham House report said, “Some of what is stolen is exported. 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 could also compromise parts of the legitimate oil business.”

It added that officials outside Nigeria were aware that the problem existed, and occasionally showed some interest at high policy levels, but Nigeria’s trade and diplomatic partners have taken no real action, and no stakeholder group inside the country has a record of sustained and serious engagement with the issue.

The resulting lack of good intelligence means international actors cannot fully assess whether Nigerian oil theft harms their interests, it stated. “It is not clear how much of Nigeria’s oil is stolen and exported. The best available data suggests that an average of 100,000 barrels per day vanished from onshore, swamp and shallow-water areas in the first quarter of 2013. This figure does not include what may happen at export terminals. But whatever the size of the problem, stolen Nigerian oil represents a tiny fraction of global crude supply and consumption, and a diminishing share of rising light sweet crude production globally. Global supply exceeded 86.1 million b/d in 2012, while global consumption topped 89 million b/d. Even assuming Nigeria lost 250,000 b/d to theft, this would represent less than 0.003 per cent of global supply,” Chatham House said in the report.

Illegal refinery in Niger Delta
Illegal refinery in Niger Delta

The research group added that Nigeria’s dynamic, overcrowded political economy drives competition for looted resources, stating that “Poor governance has encouraged violent opportunism around oil and opened doors for organised crime.” On the destination of Nigeria’s stolen crude oil, Chatham House identified the United States of America, some of Nigeria’s neighbours in the Gulf of Guinea, Brazil, China, Singapore, Thailand, Indonesia, Ukraine, Kosovo, Bulgaria, Romania and Greece, as possible recipients of Nigeria’s stolen crude. The theft, the report shows, is perpetuated by mainly Nigerians aided and abetted by foreigners from Russia, the Philippines, Ghana, Georgia, Romania, Greece, Ukraine and Cameroon.

But President Goodluck Jonathan said his government was determined to curb the menace bedevilling the country. He has asked the Extractive Industries Transparency Initiative, EITI, to lend more weight to support efforts by the federal government to stop the exportation of stolen crude oil from Nigeria. The president implored, Claire Short, chairperson of EITI, to join the federal government in working to ensure that refineries that receive stolen crude oil from Nigeria are identified and punished.

President Jonathan, who observed that Africa was losing a lot through leakages in the mining and extractive industry, also urged EITI chairperson to help in ending the exploitation of Africans and African nations by multinational companies engaged in the extraction of the continent’s immense natural resources. Jonathan said that in keeping with the federal government’s commitment to giving the Nigerian Extractive Industries Transparency Initiative, all necessary support and freedom to discharge its duties, he would inaugurate an expanded inter-ministerial committee to ensure greater synergy in NEITI’s investigations and also facilitate the implementation of its recommendations for greater probity in Nigeria’s oil industry.

The EITI boss noted that the battle to halt corruption in the Nigerian oil industry cannot be fought by Nigeria alone, thus the need for an all-inclusive solution. “What we have to do is bringing everyone to the table to expose who is doing the cheating and then stop the problem. NEITI has been doing a good work in monitoring where the oil is going. In our last report, we exposed the loses but we are now going further to show where these oils are being taken and we are going to collaborate with other nations to expose those buying them. We need to find who is buying this crude so that the international community can help us in dealing with the problems,” Short said.

He blamed the nation’s elite for colluding to rip Nigeria off huge revenue in the oil industry. However, he stated that the solution to oil theft in Nigeria must be tackled through a multi-national approach. “It’s always been argued whether it is the government, the international oil companies or the people who is responsible for the oil theft, but our experience has shown that you cannot place the blame at the doorstep of a single body. But the international community must co-operate to tackle the challenge.”

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