Alarmed by the staggering amount Nigeria loses daily from oil theft and pipelines vandalism, the federal government, international community, oil companies and security agencies are now up in arms against the criminals
| By Anayo Ezugwu | Sep. 2, 2013 @ 01:00 GMT
THE amount of resources Nigeria loses every day as a result of an increase in crude oil theft and pipeline vandalism in Nigeria has become a source of worry to the federal government and the oil companies in the country. Many multinational oil companies operating in the country attribute the increase in the crime on the prevailing harsh economic environment. It is estimated that Nigeria loses at least 400,000 barrels of crude oil per day.
This is coming on the heels of the announcement by Royal Dutch Shell, that it lost about $700 million in the second quarter of 2013, to crude oil theft, disruption of its operations in the Niger Delta, higher costs and exploration charges. Peter Voser, chief executive officer, Shell, who released the second quarter financial result, said the company recorded a second-quarter profit of $4.6 billion, down from $5.7 billion a year ago and well below market expectations.
He said the second quarter 2013 earnings on the current cost of supplies basis were $2.4 billion compared with $6 billion in the same quarter of 2012. “Higher costs, exploration charges, adverse currency exchange rate effects and challenges in Nigeria have hit our bottom line. These results were undermined by a number of factors – but they were clearly disappointing for Shell,” he said.
According to him, oil theft and disruptions to gas supplies in Nigeria were causing widespread environmental damage and could cost the Nigerian government as much as $12 billion in lost revenue per year. “We will play our part, but these are problems Shell cannot solve alone. We have made substantial improvements to our portfolio in the last few years. Today, Shell is rich with new investment opportunities and is capital constrained, the opposite position to where the company was in the middle of the last decade.”
With this, it appears that the federal government and other local authorities have given up on any serious attempt to rein in the criminal gangs. Few week ago, the Nigeria Extractive Industries Transparency Initiative, NEITI, disclosed that the nation had lost over 136 million barrels of crude oil estimated at $10.9 billion through pilfering and sabotage between 2009 and 2011. This was one of the findings in the audit report of operations in Nigeria’s oil and gas industry, which covered the period under review.
According to Ledum Mitee, NEITI chairman, about 10 million barrels of crude oil, valued at $894 million were also lost to pipeline vandalism in the downstream sector within the same period. Mitee stated further that the figure of losses to crude oil theft by the country represented about 7.7 percent of the total revenue which accrued to the federation account within the period in question.
Bukola Saraki, chairman, Senate committee on ecology and environment, said that the rate of crude oil theft and vandalism in the country can threaten the nation’s economy and the implementation of budgets of the federal, state and local governments. He said the whopping amount of money the nation was losing was capable of negatively affecting the oil and gas industry and the entire economy. He stated that it was imperative for Nigeria to diversify its economy to avoid a mono economy or being dependent on oil revenue for its financial obligations. He added that there was the need to muster enough political will to confront oil thefts, adding that it had become urgent, given the colossal loss and its negative impact on the economy.
“Definitely, the huge amount of money being lost to oil theft could make the economy not sustainable. It is not acceptable and it is a danger to the entire economy. If you look at the figures they are talking about, which is close to 20 per cent of the total production, then it is something that calls for alarm. The level of oil theft is not sustainable and definitely it is an inherent danger to our economy and to all our budget implementation. The major issue on the oil theft is that we need to diversify our economy. One of the key issues is that we cannot continue to be a mono product economy. There is need for us to look at other resources of revenue. Be that as it may, I believe also that we need to have the political will to confront head on some of these abuses and some of these sabotages and thefts that are going on. I believe that the agencies should do the job required of them,” he said, adding that the federal government was making efforts to address the malaise in the oil and gas sector.
The Lagos Chamber of Commerce and Industry, LCCI, also blamed the federal government for the increased crude oil theft in the country. It said that the federal government and security agencies in the country know the people behind the oil theft. Babatunde Ruwase, LCCI, vice-president, said only the rich and powerful could engage in oil theft, arguing that the equipment such as barges, tankers as well as manpower used in stealing crude were not cheap. “You need to be a millionaire to be able to steal oil. The barges and tankers oil thieves use are very expensive. The government and the security agencies know them. Not until we decide to turn a new leaf, nothing will change as far as oil theft is concerned. These thieves are not ghosts,” he said.
In view of the rising challenges of crude oil theft, the relevant authorities have started taking proactive measures to arrest the problem. Jonah Jang, Plateau State governor and factional chairman of the Nigerian Governors’ Forum, recently set up a committee comprising of governors from oil bearing states to check crude oil theft in the country. Emmanuel Uduaghan, Delta State governor and chairman of the committee, said the NGF is committed to checking the challenge of oil theft in the country. He noted that the forum’s security initiatives, especially since after the shutting down of two major pipelines – Trans-Niger and Nembe – had started to pay off. “As I speak today, the two pipelines, vandalised and damaged, have been repaired and re-opened,” he said.
The House of Representatives has also deployed its Committee on Petroleum Resources (Upstream) to intervene in an attempt to revive the petroleum sector in the country. Ajibola Muraina, chairman of the committee, visited the Department of Petroleum Resources, DPR, on the issues at stake. The department is significant in the fight against corruption in the oil and gas sector, given its power to regulate and monitor oil and gas activities in the upstream and downstream sectors to ensure compliance with standards and global best practices. It was the second visit by the committee to the DPR headquarters in one year.
The committee’s chairman indicated this much when he lamented the weakness of a system which, he said, allows a staggering 400,000 barrels of crude oil to be stolen per day with huge revenue loss by the country. According to him, such volume of stolen crude oil equals daily production capacity of about 14 oil-producing countries from across the globe.
The international community is also paying attention to the monumental loss of Nigeria’s prime asset. Recently, the European Parliament banned the purchase of stolen crude oil from Nigeria. This was one of the landmark decisions taken at the meeting of the members of the African, Caribbean, Pacific Parliaments and their European Union counterparts, ACP-EU, at the conclusion of their three-day regional meeting in Abuja. It said that any crude oil meant to be sold in the European market must be accompanied with a certificate of origin.
Mitchell Rivasi, co-president, ACP- EU, said that the need to stop the huge loss of Nigeria’s oil to organised syndicates of oil thieves necessitated the decision. “We want to ban European refineries from buying un-certificated oil. The 400, 000 barrels a day is a huge loss. We need to get traceability of oil to avoid theft. The oil companies are involved in this and everybody is making big money. The bunkering tankers are better equipped than the Nigerian Navy. This is a huge international organised crime. We did it with diamond; we can also do it with oil,” she said.