Oil Theft, as Clear Threat to Nigeria’s Economic Survival
Unless Nigeria ends crude oil theft and assets’ vandalism in the Niger Delta, the country’s economy will continue to wobble, at least in the short to medium term, writes Emmanuel Addeh.
An Intractable Problem
The twin problems of oil theft and pipeline vandalism are not new to Nigeria. Indeed, like in a handful of other crude oil-producing nations worldwide, the multi-decade economic menace is almost as old as the global economy itself.
But what appears new in Nigeria’s case in recent times, is the high-level, unbridled and mindless pillaging of the nation’s commonwealth and the lack of capacity of the Nigerian state to contain the menace which is nearly bringing the nation’s economy to its knees.
The energy transition effect apart, Nigeria is almost becoming a no-go investment destination for investors in the sector. The ones that have operated in the country for over five decades are either leaving or moving their operations into the deep offshore. This move is meant to avoid the headache of dealing with illegal oil bunkering and incessant destruction of pipelines as well as other assets.
Shell has announced plans to sell its Nigerian onshore subsidiary, Shell Petroleum Development Company of Nigeria (SPDC) to Renaissance Consortium; Equinor has exited; Italian energy giant, Eni is selling its Nigerian subsidiary, Nigerian Agip Oil Company, to Oando and ExxonMobiI is selling to Seplat Energies.
Some of the bold indigenous oil firms that have decided to throw their hat in the ring by making huge investment in the oil and gas sector are struggling. Aiteo, one of the country’s biggest E&P indigenous firms as recently as last week temporarily shut down its operations after a breach on one of its assets in Bayelsa.
From the production of over 2 million barrels per day in 2019, the country is struggling to raise output to 1.3 million bpd. In fact, that figure is seen as a massive improvement, given that in the last quarter of 2022, production fell to as low as 900,000 bpd.
Following the unprecedented outcry by some of Nigeria’s most reticent public figures, including businessman, Tony Elumelu and even the clergy led by the General Overseer of the Redeemed Christian church, Enoch Adeboye, at the time, the federal government adopted a model of reverting to its once despised Niger Delta militants led by Government Ekpemupolo, otherwise known as Tompolo.
Aside spending about N50 billion yearly on just one of the local security contractors, there is also the Joint Task Force (JTF), Operation Delta Safe, comprising all the armed forces, down to even the federal road safety corps recruited to tackle the problem. Then there is the Nigerian Navy’s “Operation Delta Sanity,” launched for increased maritime surveillance.
But even those security architectures have not markedly borne results. Admittedly, there has been some improvement, but it’s been painfully slow, with its attendant cost to the nation’s economy.
Historically, Nigeria has always deployed proceeds from the sale of oil as a buffer to economic shocks like it is currently having from the ongoing reforms embarked upon by the Bola Tinubu administration. Things are different now. The nation has become a massive borrower, both internally and externally.
Nigeria in recent times, has resorted to borrowing to augment the little inflow of foreign exchange into the country’s FX market, first taking foreign loans of $1.71 billion to boost FX into the country in the first nine months of 2023.
In August last year, Nigeria’s state-oil firm, announced that it had secured a $3.3 billion crude oil repayment loan from Cairo-based Afrexim Bank that will support the government’s reforms to stabilise the exchange rate market.
A THISDAY’s recent estimation of losses to oil theft and pipeline vandalism in the first five months of 2024, showed that the country may have lost as much as $3.57 billion to the menace during the period. This is given an estimated average Brent crude oil price per barrel of $85 in 2024 so far.
The Nigerian economy is haemorrhaging, the oil thieves are having a field day and the authorities appear to be helpless if not hopeless in dealing with the situation.
Whereas the oil quota allocated to Nigeria by the Organisation of Petroleum Exporting Countries (OPEC) in 2024 is 1.58 million bpd, with a federal budget benchmark of 1.78 million bpd, Nigeria is still far from meeting this target. The situation has, as expected, disrupted budgetary expectations.
To underscore how critical crude oil is to the Nigerian economy, the commodity constitutes up to 80 per cent of Nigeria’s foreign exchange earnings and almost 70 per cent of its yearly budget. This is why the federal government working with the sub-national governments need to tackle the problem head-on.
Unprecedented Losses
The losses have been unprecedented. The National Security Adviser (NSA), Nuhu Ribadu, stated recently stated that the country lost 400,000bpd to theft. Aside Ribadu, a former Minister of State for Petroleum Resources, Timipre Sylva, said Nigeria lost at least 700,000bpd to the thieves in 2022, not in any way comparable to other oil-producing countries plagued by oil theft like Venezuela, Iraq, Mexico, and Malaysia.
In October last year, the Nigerian Senate revealed that the country lost N2.3 trillion to crude oil theft during the year.
Last week, the Nigerian National Petroleum Company Limited (NNPC) reported a staggering 400 incidents of crude oil theft, with the bulk of them occurring in the Western region of Rivers and Bayelsa states.
In 2022, the NNPC stated that it lost $700 million every month to oil theft. The Nigerian Extractive Industries Transparency Initiative (NEITI) has revealed that Nigeria lost 619.7 million barrels, valued at N16.3 trillion, to crude oil theft from 2005 to 2021.
Besides, in 2023, the NNPC spent N136 billion on security, repairs, and maintenance of vandalised infrastructure, according to Dataphyte.
On June 18, THISDAY carried out a review of the latest information from the NUPRC, indicating that going by the 1.58 million bpd OPEC quota, in the first five months of this year, the country was supposed to produce 240 million barrels.
However, the data showed that Nigeria only managed to drill a volume of about 198 million barrels of crude oil, leaving a deficit of about 42 million barrels of OPEC-sanctioned production during the period.
A vast portion of the over 5,000 kilometres of oil pipelines is non-functional due to vandalism, according to the NNPC Group Chief Executive Officer, Mele Kyari. Furthermore, it is believed that operators spend almost 50 per cent of their oil revenue in defraying the cost of production. A huge part of this cost goes into security of their oil assets.
In September last year, Speaker of the House of Representatives, said Nigeria lost about $46 billion to crude oil theft in 11 years, a development that drastically hampered the growth of the country’s oil production, with Nigeria losing up to 30 percent of daily production.
A Web of Complicities
Beyond the oil usual suspects, the recent development of massive connivance from local security contractors has become a matter of concern for operators. To buttress this, an oil surveillance operation last week smashed a huge illegal bunkering camp in Bayelsa, Niger Delta, with certain entities, including one of the pipelines security subcontractors to Aiteo Eastern Exploration and Production Company (AEEPCO), an indigenous oil exploration company, fingered in the incident.
Identity cards found on the sites by one of the major pipeline surveillance firms in the Niger Delta recently contracted by the NNPC, showed that the materials belonged to the oil pipeline subcontractors who were hired to watch over major assets.
Specifically, the operation which took place during the early hours of Sunday, June 23, led the surveillance security operatives to conduct patrols in the Okoroba axis of the Nembe local government area of the state. Their mission led them towards the Elemuama area.
When the operatives moved to dismantle the illegal operation site, sources with knowledge of the incident said they uncovered startling evidence implicating one of the subcontractors in massive oil theft in the area.
The identity cards of the employees of the surveillance firm discovered on-site and other incriminating evidence have now raised several questions about the complicity of the company and its owner’s involvement in illicit oil bunkering activities in the region.
Also revealed during the raid were two additional unauthorised bunkering camps nearby, wherein the surveillance team seized and subsequently destroyed two large boats loaded with crude oil and a fibre boat.
Fingered was one Livingston whose operations spread across Bayelsa State, specifically in the creeks of Nembe-Brass. He is said to own several illegal bunkering camps and controls a vast transportation network that transports illegal refined petroleum products to various parts of the state.
But Livingston, though a surveillance subcontractor is also said to be the coordinator of all illegal bunkering groups that that had been complicit in vandalising the facilities of the company.
A source stated that many oil thieves suspects had been treated with kid gloves for a long time and that if the culprits are not arrested and prosecuted to serve as a deterrent to others, illegal bunkering may continue in the area.
In addition, one other suspect popularly known as “Organiser,” who is said to be orchestrating a sophisticated network that recruits and transports individuals to carry out the destructive activities, also has his illegal activities at Nembe and Brass locations.
“His continued evasion of justice underscores the need for stringent measures to halt systematic economic sabotage in the region.
“This collaboration has significantly impeded efforts to address and resolve the nation’s oil theft crisis. To safeguard the region from further environmental and economic harm, it is imperative to bring these figures to book, ” a source said.
He queried how the environment can be saved from the illegal bunkering activities when people like Livingston are stealing, destroying and selling oil companies’ facilities and products in the area.
“They should be arrested and prosecuted to serve as deterrent to others. His ways of operations are to recruit boys in cutting pipes and transporting them for sale through a well organised sophisticated dark transport network.
“People like ‘Organiser’ should not be allowed to vandalise oil facilities continuously but should be brought to book to free our society of a systematic economic sabotage,” the person with the knowledge of the activities in the location stressed.
In the past week, the NNPC reported a staggering 400 incidents. Most of the incidents had to do with unauthorised pipeline connections, vandalism, oil spills, and unlicensed storage sites.
“Measures such as the complete confiscation of assets and freezing all accounts using Bank Verification Numbers (BVNs) will be a highly effective course of action by the Economic and Financial Crimes Commission (EFCC) and relevant bodies as Nigeria seeks to combat oil theft. We must ask the EFCC what steps they are taking to address this situation,” the concerned source stated.
Some of the worst-hit oil companies have recently begun the transportation of their crude through significant arteries like the Nembe Creek Trunk Line (NCTL). But the disruptions not only lead to production downtime and loss of crude oil, but result in additional expenses in facility repairs.
No Consequences for Offenders
The perpetrators of these monumental heists are seldom made to face the full wrath of the law. As far back as 2014, Chatham House in a document described the situation as one “on an industrial scale,” accusing “politicians, military officers, militants, oil industry personnel, oil traders and communities” of complicity.
As rampant as cases of oil theft and pipeline vandalism are, there is hardly much publicity about any thoroughly prosecuted cases, leading to jail terms for offenders.
As it seems, neither the local security contractors nor the military has been able to win the fight against oil theft, thereby requiring a different approach from the authorities beyond the raids and destruction of crude oil and equipment used in harvesting it. The strategy has not worked in over a decade.
Many Nigerians, including the NNPC, have called for special courts to handle and quickly dispatch cases of oil theft. This call has not been heeded by the authorities.
With Nigeria’s growing debt, the president must ensure that oil thieves are punished in accordance with the law, not minding who is shielding them.
Rather than what seems like slap on the wrist in the cases of the few that are caught. Whichever way one looks at it, what is obvious is that the government is not doing enough to end these huge economic crimes.
