The menace of crude oil theft in Nigeria has again gained attention in the country. In this write-up, Olusola Bello tries to examine the implications of this dastardly act threatening to destroy the nation’s economy.
Crude oil theft has grown into a huge monster threatening the Nigerian economy.
Nigeria lost $3.2 billion in crude oil theft between January 2021 and February 2022, according to the statistics presented at a recent meeting held in Abuja between the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Oil Producers Trade Section, and the Independent Petroleum Producers Group (IPPG) to discuss crude oil theft.
This puts the figure to about N1.36 trillion when converted to naira with the official N416.25 to dollar exchange rate, a development that has forced the country’s crude oil production to go way below quotas by Organisation of Petroleum Exporting Countries (OPEC) and benchmark in the 2022 budget.
A good number of the crude oil lost was also to illegal oil bunkering, a problem that seems to have taken a turn for the worse since global oil prices skyrocketed.
According to a survey conducted by Reuters for April crude oil Production by members of OPEC, It stated that under-production in Nigeria has led to a much lower increase in OPEC production for the month of April than was called for by the cartel’s supply agreement.
On Environment
The activities of these crude oil thieves have led to serious environmental degradation, pollution, and air pollution in the Niger Delta. Over 100 people were recently burnt alive while in the process of scooping crude oil in Imo State.
Some of the arable lands and waters in the vicinity of the areas where crude oil theft has taken place are almost permanently unusable for either farming or fishing. The vegetation in those areas has turned yellow.
Divestment
One of the major reasons for divestment by international oil companies from the onshore assets is because of the unabated crude oil theft. This action has also denied the country from being a major investment destination thereby making it impossible to get the necessary inflow of foreign exchange that is badly needed to bolster the economy. Other IOCs are also planning to divest from more onshore assets.
Voicing his frustration over the problem, Tony Elumelu, who owns huge stakes in Tenoil, in a series of tweets sometimes ago claimed that businesses are suffering. How can we be losing over 95 percent of oil production to thieves? Look at the Bonny Terminal which should be receiving over 200,000 barrels of crude oil daily, instead, it receives less than 3,000 barrels, leading the operator, Shell to declare force majeure, which has taken a toll on their businesses.
Although, the minister of State for Petroleum Resources, Timipre Sylva, has debunked the figure claimed by Tony Elumelu by saying that he could be referring to his production and not the national production level.
This, notwithstanding, the havoc the activity is causing the national economy if not checked; the country may soon be brought down to its knees. Analysts say the situation portends danger for the country’s social-economic development.
Mele Kyari, group managing director of Nigerian National Petroleum Corporation (NNPC) Limited has described it as a national emergency on account of the proportion, dimension, and sophistication it has taken in recent times.
Nigeria, as an oil-producing country, ought to be enjoying a windfall now with the sudden rise in the price of crude oil in the international market due to the Russia-Ukraine situation.
Before the Russia-Ukraine crisis, crude was selling between $96 and $97 per barrel. It shot up to $105 per barrel the following day after the conflict began. It has since then been hovering between $110 and $125 per barrel since then. Nigeria is not reaping as much as it should from this because it is not able to meet its OPEC production quota.
In fact, crude oil production has dropped to an all-time low of 1.29million barrels per day (without condensate). The addition of condensate brings Nigeria’s current production to 1.49mbpd.
A look at production figures from 2020 till date shows how much of a monster the menace of crude oil theft has become. The average production in 2020 was at 1.77mbpd.
It would be recalled that 2020 was the year Covid-19 almost brought the world to a halt with virtually every country on lockdown. This saw the price of crude oil crashing to sub-zero levels with an unprecedented demand dip. This development resulted in zero crude oil theft in Nigeria, obviously because there was no market for the thieves to sell their stolen crude. This saw the country recording its highest production level of 2.49mbpd on 17th April 2020.
According to Mele Kyari, what that development showed was that Nigeria has the capacity to produce that figure (2.49mbpd) on any normal day because there was no special intervention of any kind that led to that peak production on that day.
However, as normalcy began to return and the price of oil began to experience a steady rise, the oil thieves began to step up their game and upstream operators began to experience production losses which have been growing since in almost direct proportion to the rise in crude oil price in the international market.
Explaining the situation recently, the NNPC boss said it got to a point where, if you inject 239,000 barrels of crude oil into either of the Trans-Niger Pipeline or the Nembe Creek Trunk Line (these are some of the major pipelines that convey crude oil to the terminals for export), you will only receive 3,000 barrels. It got to a point where it was no longer economically sustainable to pump crude into the lines and a force majeure was declared.
In 2021, a similar trend was observed. In January of that year, out of about 239,000bpd pumped into the line, only 190,000bpd was recovered putting the loss at 19,000bpd.
The rate of oil theft kept increasing as the price of crude oil was rising in the market until March 2022 when there were zero recoveries from all the volumes that were pumped into the line.
Another noticeable pattern in the trend of oil theft is that it is more endemic with Joint Ventures assets and those that belong to the Independents than with Production Sharing Contracts assets. This is likely because of the nature of the JV assets which are mainly onshore or in swamp/shallow waters. This makes the evacuation pipelines more accessible than those of the PSCs which are offshore and in deepwaters.
There is also a pattern in the way the theft is carried out. This can be discerned from the size of pipes inserted on the lines and the technology deployed in carrying out the insertion.
In some cases, the pipes inserted to steal crude oil from the lines are small and fitted in an amateurish way. This is an indication that those involved are small-time criminals, more likely artisanal refiners who operate the slew of illegal refineries that dot the creeks of the Niger Delta from Akwa Ibom to Rivers, and from Delta to Bayelsa.
Some of the pipes fitted into the lines to siphon crude oil are big. In some cases, they are of the same size as the pipeline or of the size that is used at the terminal to pump crude into vessels. A close look at them would reveal that they are professionally fitted with the use of cutting-edge technology. There have been cases where there are riser pipes were used indicating that the criminal deployed cranes. These cases indicate that the persons involved are not the regular illegal refinery operators but sophisticated and very knowledgeable criminals with access to vessels through which they ship the stolen crude oil out of the country.
The involvement of this last group is what accounts for the high volumes involved in the theft which has become an existential economic threat to the oil and gas industry and even Nigeria as a nation.
On the other hand, artisanal refiners and their illegal refineries have constituted a very grave danger to the environment and people of the host communities through the heavy pollution caused by their activities. This is beginning to cause soot in the atmosphere health challenges in some of those communities.
In terms of the financial loss to the nation, in 2021 the total volume of crude oil stolen is put at 200,000 per day. At an average price of $55 per barrel, the total loss came was about $bn (from January to December 2021).
In 2022, between January and April alone, the volume of crude stolen has risen to about 250,000 barrels per day putting the total loss at about $1,5bn (at the rate of $100 per barrel).
Another way to look at the virulent nature of the crime is to look at the rate at which the crude pipelines are breached with insertions. On a stretch of 20kilometers pipeline, there were 85 insertion points in three weeks!
The Trans-Forcados Pipeline, which is about the most reliable of all the landlines, is not spared. It records about 19,000bpd loss days.
There is also the case of sheer vandalism where the lines are just blown out with explosives resulting in spillages and environmental hazard.
Yet another area where oil theft is affecting the economy is the area of investment. It has slowed down the gains the PIA is supposed to bring about in the area of investment. Potential investors now ask how they can recoup their investment when crude oil is stolen.
With the twin menace of oil theft and pipeline vandalism assuming epidemic proportion, the President has given marching orders to the Chief of Defense Staff to lead a war against the criminals
All the security agencies have been mobilized to flush out the criminal element and restore normalcy.
In fact, the DSS and the Navy have already made some arrests.
NNPC has also deployed community-based security to monitor the pipelines while it is working on deploying technological tools for more effective surveillance and monitoring of the lines and facilities.
EFCC and NFIU are also tracking the movement of funds relating to the criminality
While there is hope that all the measures that have been deployed so far will begin to yield results within the next two months, it must be pointed out that oil theft and pipeline vandalism are problems for everyone. Apart from the host communities that are directly affected by environmental degradation, every citizen suffers the loss of national revenue when the government does not have enough to provide social amenities and infrastructure to improve the quality of life in the country.
It is, therefore, imperative for all Nigerians to rise up against those behind crude oil theft and pipeline vandalism with a view to stamping them out so that the oil and gas industry can yield the fullness of its benefit to the nation and the citizenry.
