This is the title of the book written by Proshare Nigeria Limited concerning crude oil theft, the most lucrative trade in Nigeria. Here below is an extract from the Executive Summary of the book. The book explains the various intrigues involved in crude oil theft, the actors and the dangers involved if the trade continues unchecked. It also proffers ways that the government can tackle the problem. It provides an interesting insight into the politics of crude oil theft in the Nigerian oil and gas industry.
What is the best way to stop thieves from breaching the doorways of a house? Hand over the keys to the castle! Of course, this would be ludicrous in many contexts, but it stretches the debate on curbing crude oil theft in Nigeria’s excitable Niger Delta.
Notably, this report used the concepts of crude oil theft and illegal oil bunkering differently. While crude oil theft is conceptualized in the report as the illegal appropriation of crude oil from oil companies’ pipelines, illegal bunkering is conceptualized as illegally loading stolen crude oil into ships.
Not only do the strange land title and resource ownership laws produce a socio-political behaviour that pits the federal and state governments against each other, but it also produces a sense of alienation for people living in mineral-producing belts.
Nigeria’s fiscal structure and statutes place mineral resources, including oilfield ownership, in the federal government’s laps even though state governments issue the rights to landownership through certificates of occupancy (C of Os) or Deeds of Assignments.
In other words, in Nigeria, the land belongs to the state governments, but mineral resources within it belong to the Federal Government; the logic creates minefields of conflicts.
The absence of a direct link between the economic growth and development of mineral-producing areas and the exploration, production, and sale of mineral resources in their communities strips the activities of their legitimacy in the eyes of the local population. Further, it stirs up narrow and aggressive nationalism as the communities fight against perceived “exploitation.” The problem is not just greed but entitlement. Communities and their leaders believe they should benefit adequately from mineral resources on their lands. They are not wrong, but the case for equity cannot justify theft
Communal perceptions of being short-changed spur actions that lead to “self-help,” where wealthy individuals gain the support of communities to exploit the resources for individual and collective gains. Observers note that former regional insurgent leaders have transmuted into either leading oil pipeline vandals or owners of unregistered smoke-belching “modular” refineries. What happens in the Niger Delta occurs in the solid mineral-producing parts of the North, where foreign and local cartels engage in illegal artisanal mining of precious metals.
The Big Boys Playground
Crude oil theft in Nigeria’s Delta area is not the casual roguery of a ragtag band of militants but a wellstructured and coordinated criminal enterprise. The enterprise comprises a network of highly placed individuals from different walks of life, from the military to politics, commerce, and banking.
The players are entrenched, ruthless, and unforgiving. The oil vandals’ vast connections and deep pockets make them formidable and explain the difficulty in dislodging them. The prominent role of non-state actors in crude oil market disruption will not be ended by the finer points of fiscal economics alone; it would require the political firmness and commitment of the federal government to take on the illegal local oil cartels. Unfortunately, this outcome is far-fetched.
Oil pirates and their political associates are pod partners. Rich oil vandals support the funding of election campaigns of politicians who would be remiss in supporting any decisive government action that would adversely affect the interests of their electoral piggy banks.
The complex relationship between politicians, illegal oil bunkers, and local oil communities makes a firm resolution of the problem more improbable than impossible. Curbing crude oil theft would require political will, which is in short supply.
With political will, the country would have seen geospatial technology, high-impact drones, and sweeping ground forces combine to create a canopy of forceful correction. The orchestrated interplay between technology and troops would have translated into higher official oil output, higher fiscal earnings, and more considerable private sector investment.
The elite conspiracy to allow crude oil theft to breed and flourish reflects the integrity gap in governance at all levels. In the short term, the politics of crude oil theft trumps the economics of national survival. However, refusing to address the crude oil theft problem frontally will do the economy and lead to social unrest that may be difficult to contain as income disparity and poverty lead to a mass movement of the unemployed and socially marginalized.
The federal government has shown a more significant desire to combat oil piracy in recent weeks. The Nigerian Navy recently shut down fourteen illegal refineries in the Niger Delta area and is on the hunt for more. Knowing if this is a sop to local elites who are heavily invested in the sector and bleed losses from the activities of vandals or a genuine attempt at stopping oil piracy is yet to be seen.
Observers are keen on seeing the outcome of the power play between the federal government and oil pirates. The broad notion is that the activity will continue if the underlying economic returns of vandalism compensate for the risk of oil piracy. The more powerful and forceful the government is in confronting the problem, the better the outcome for Nigeria’s fiscal situation and the long longer-term sustainability of the sector
Closing the Leaky Oil Valves
Drone surveillance and daily geospatial analysis of oil supply ‘drift’ would estimate the quantity of oil illegally ferried from different locations. The data gathering would enable security forces to intervene efficiently, effectively, and decisively. The giant elephant in the room is the political will required to break the back of the private oil lords. In this situation, local refiners are at the mercy of oil pirates, who plug the gaps created by the absence of official supplies. Some operators allege that the shortage or lack of official supply is forcing them to patronize unofficial supply markets in which government officials have an ownership interest.
In places like Arepo, in Ogun State, for example, nondescript tankers pass in a daily convoy from pipeline locations passing through the southern riverine boundaries of the ‘Journalist Estate’ on alleged “orders from above.”
Drone surveillance and daily geospatial analysis of oil supply ‘drift’ would estimate the quantity of oil illegally ferried from different locations. The data gathering would enable security forces to intervene efficiently, effectively, and decisively. The giant elephant in the room is the political will required to break the back of the private oil lords.
With the network of beneficiaries of Nigeria’s crude oil theft allegedly cutting across a broad section of collective interests and influential urban elites, fending off the local oil mafia would be a study in asymmetric economic warfare. The combination of national security concerns and international oil price movements presents a rich mix of potential outcomes..
Closing leaky oil taps of illegal activities would require some quick and dirty fixes and longer-term solutions:
Quick and Dirty Fixes
Regular aerial (geospatial) surveillance of oil-producing areas to assist production audits.
Arrest and prosecution of pipeline vandals and illegal local oil refiners.
Community incentives to “see-and-tell.” should be arranged and sustained.
Ground special forces to ensure the neutralization of illegal bunkering activities.
Tighter West African sub-regional border controls.
Longer-term Fixes
Removal of domestic petroleum subsidy to reduce the incentive to vandalize oil pipelines and ferry products across sub-regional borders.
Rehabilitate the four local NNPC refineries.
Pivot away from fossil fuel to clean energy alternatives.
Plugging the loopholes in the local oil production value chain will not be a walk in the park but a problematic, grimy, and gritty slog through the policy and execution trenches. Solving complex problems is never easy, no matter how pleasant the outcomes are.
The report, in six (6) sections, highlights the cost of the loss of revenue from oil theft, shut-ins, illegal bunkering, off-bar oil sales, and cross-border diversions. It points to the fiscal damage done by oil theft and the accompanying environmental degradation that adds a further national cost from the activities of oil pirates. It seeks to establish the case for a maritime strategy as a basis for a sovereign response and an opportunity for building the blue economy
