Unending Threat of Crude Oil Theft

IN THE ARENA

Wale Igbintade 

reports that the inability of the federal government to tame the menace of crude oil theft is still costing the country huge revenue loss

When the Nigerian National Petroleum Company Limited (NNPCL) entered into a security agreement with Tantita Security Services Limited in 2022 to tackle crude oil theft in the Niger Delta, very few Nigerians expressed support for the deal. It was widely believed that the security of such a critical national asset should not be handed over to a non-state actor.

Before the contract was awarded, NNPCL’s Group Chief Executive, Mele Kyari, and the then Minister of State for Petroleum, Timipre Sylva, had raised the alarm that more than 700,000 barrels of Nigerian oil were stolen daily.

The knock-on effect of this crude oil theft is that foreign exchange reserves are under considerable pressure, as the shortage of US dollars causes the naira to depreciate. 

Nigeria also relies on crude oil and gas revenues to fund much of the federal government’s budget.

Soon after the agreement was sealed, it started yielding positive results as the country began experiencing an increase in crude oil sales in the international market. 

Cumulatively, Nigeria’s national oil production recovered to an average of more than 1.47 million barrels per day in November from an all-time low of 1.1 million barrels per day before the contract was signed in August 2022, according to documents released by the NNPCL. This translates to an increase of over 300,000 bpd.

Likewise, findings further suggest that oil production continued to improve significantly as more and more wells and associated surface facilities, hitherto shut down by ongoing theft and vandalism, reopened. Specifically, the Joint Venture assets, mainly onshore, which were mostly affected by the security challenges, the NNPCL witnessed a slump in production from a monthly average of 800,00 bpd in January 2022 to about 500,000 bpd in August 2022.

The country’s average joint venture oil production in the August to November 2022 period increased by about 190,000 barrels per day. A breakdown of the joint venture’s increase showed that as of August, oil production averaged 502,759 barrels per day, which is the lowest in 2023.

According to the document, production rose to 521,834 bpd in September 2023 following the signing of the safety contract on August 13, before rising further to an average of 590,431 bpd and 668,147 bpd in October and November. Before the agreement, disruptions to major arterial lines severely had also affected gas production and evacuations, depriving gas-fired power plants and industrial feedstock operations.

However, 2,426 oil theft incidents were reported in the last four months even as the nation’s crude oil production struggles.

From December 30, 2023, to January 5, 2024, NNPC reported 157 breaches on oil assets. The following week, which ended on January 14, the cases of theft went to 211; 214 in the week ending January 19; 176 by January 27 and settled at 241 breaches by February 2. By February 9, the theft figure stood at 354, 226 by February 16, 253 by February 23 and 263 by the first of March. In the first two weeks of March, the theft cases stood at 335. Monthly, the cases of theft hovers around 1,337.

Crude oil production data for Nigeria was 972,394 barrels per day in August 2022 and 937,766 bpd in September when the war against oil theft started.

Oil production in October of 2022 was 1.014 million barrels per day. It went to 1.186 million per day in November. The country recorded 1.35 million barrels per day in December 2022. 

In January of 2023, the overall crude oil production rate for the country was 1.4 million barrels per day, which means condensate and crude oil. It recorded a daily crude oil production of 1.47 million barrels per day for February before reducing to 1.2 million barrels per day in March 2023.

With the addition of condensates, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) said oil production rose from 1.245 million bpd in April 2023, to 1.427 million bpd in May the same year. Nigeria’s crude oil production came in at 1.48mbpd in June 2023 (inclusive of 55,088bpd and 176,030bpd of its blended and unblended condensates respectively). The production in July was 1.30 million barrels per day. The oil production was 1.48 million barrels per day for August. September output was 1.5 million barrels per day, it was 1.5 million barrels per day in October, in November 2023, Nigeria’s oil production dropped to 1.2 million barrels per day before rising to 1.418 million barrels per day in December 2023.

In January 2024, the production was 1.419 million barrels and further dropped to 1.3 million barrels per day in February.

The crude oil production benchmark in the 2022 budget was 1.60 million barrels per day, and in 2023, 1.69 million barrels per day. For 2024, the production benchmark stands at 1.78 million barrels per day. However, none of the budget benchmarks have been met.

Despite the militarisation of the Niger Delta region and the involvement of private security outfits to safeguard oil production and reduce crude theft, those accused of stealing the nation’s crude appear to be unrelenting and outsmarting the system in an unabated theft.

Most stakeholders believe that the many approaches deployed by the federal government and continuous spending by the state oil company have failed as they called for an immediate overhaul of the security architecture of the oil sector.

Speaking during the oversight function of the House of Representatives Special Committee on Oil Theft at the headquarters of NNPCL in Abuja in March, Kyari, said in one year the state oil company recorded 9,000 infractions on pipelines.

While he alleged that the Nigerian elite are the brains behind crude oil theft, foremost Ijaw leader, Chief Edwin Clark debunked it, alleging that NNPC and military were behind oil theft.

The Nigerian Army, Navy and the Nigeria Security and Civil Defence Corps (NSCDC) have a series of operations in the oil-producing areas of the Niger Delta. Daily, they show pictures and videos of illegal refineries and pipeline points that are rescued from breaches and in some cases, make arrests. However, these illegal activities remain prevalent.

 Many have argued that if stolen diamonds in Sierra Leone and the Congo could be labelled as “blood diamonds,” in the international system, Nigeria’s stolen crude should be similarly labelled.

 They also canvassed the reviewing of the penal regime to ensure that convicted felons serve long jail terms, while their vessels and trucks are forfeited to the government.

Niger Delta communities and their leaders should also spare no efforts in combating oil theft in the region. Bunkering, sabotage of pipelines and illegal refineries are criminal acts that not only threaten Nigeria’s economic security but also damage the environment and aquatic life. Therefore, a joint effort is required to tackle this menace.