By Prof Mike Ozekhome SAN

INTRODUCTION

The 2nd part of this treatise continues where last week’s feature stopped, namely ‘military and other security forces’, followed by ‘resident oil companies’ and ‘the local populace’. I then wonder aloud: ‘why are they stealing Nigeria blind?’. This is followed by another poser: ‘how is oil theft carried out?’, to which I proffer the following answers: (through so-called) ‘hot-tapping’, ‘cold-tapping’, terminal and vehicular transportation’, etc, concluding with what I see as the cost of the phenomenon. In this week’s feature, we shall examine the negative impact of oil theft on our economy and conclude with some recommendations for mitigating oil theft. Please read on.

THE NEGATIVE IMPACT OF OIL THEFT ON NIGERIA’S ECONOMY

The impacts of oil theft in Nigeria cannot be over emphasized. It has led to unstable economy, mass poverty, corruption, security challenges amongst others. It has left Nigeria behind in the race of the third world country. This is not healthy for a developing Nation that is beclouded with so many political and social variables.

1. LOSS OF REVENUE: The Nigerian government has lost substantial revenue, courtesy of oil theft. The stolen oil is sold on the black market, bypassing legal channels and depriving the state of crucial income that could be used for public infrastructure, social programs, and economic development. According to estimates by the Nigerian National Petroleum Corporation (NNPC), the country lost around $41.9 billion to oil theft between 2009 and 2018. The situation is even worse in the successive years as seen above.

2. CONSTRAINTS IN BUDGET: Oil theft has dealt a negative blow in other sectors. It creates budgetary constraints, leading to government reducing expenditure in other vital sectors germane to livelihood such as the health, education and infrastructural development sectors.
This leads to a lack of investment in these areas, hindering human capital development and overall economic growth. The instability caused by inconsistent revenue inflows also undermines investor confidence and discourages foreign direct investment.

3. ENVIRONMENTAL DISASTERS: Oil spillage is always a likely attendant consequence of production. This has led to pollution in many states of the Niger Delta region. Oil smugglers employ crude and unsafe methods to extract oil, damaging pipelines and infrastructure in the process. These incidents result in widespread contamination of farmlands, water sources, and ecosystems, posing serious health risks to local communities and affecting agricultural productivity. The environmental consequences of oil theft exacerbate the economic challenges faced by Nigeria.

4. SOCIETAL EFFECTS: Oil theft effects the society in various ways. Since it is a lucrative endeavor, the proceeds from oil theft are often used to fund criminal activities, including insurgency, terrorism, and other forms of organized crimes. This creates security challenges, particularly in the Niger Delta region, where most oil theft incidents occur. The presence of criminal networks also fuels corruption and exacerbates social inequality, further hampering economic progress and development.

MY RECOMMENDATIONS

Combating oil theft requires a community effort and approach by the law enforcement agencies, technological advancements, proactive government policies and even the cooperation of local communities.

TECHNOLOGY

Happily, the NNPC launched an App (applications platform) to monitor crude oil theft in the country. The company launched the app in Abuja at the signing of renewed Production Sharing Contracts (PSCs) agreements between NNPC and its partners in oil mining leases.

The platform ‘Crude Theft Monitoring Applications’ was created for members of host communities and other Nigerians to report incidents of oil theft and get rewarded. The Group Chief Executive Officer of the NNPC Limited, Mele Kyari, had in April disclosed that Nigeria lost $4 billion to oil theft at the rate of 200,000 barrels per day in 2022. This is not withstanding the fact that the country already lost $1.5 billion so far in 2022 because pipeline vandalism has escalated. The country was losing 95 per cent of oil production to oil thieves at Bonny Terminal, Rivers State. This is alarming. What is left for the country?

Therefore, there should be a round table conference by relevant stakeholders whose sense of patriotism, integrity and national loyalty are unwavering in this journey of ours – Nation building.

1. SECURITY ENHANCEMENT: security is a key factor in combating oil theft. Enhancing security measures around oil installations, pipelines, and waterways is essential to deter oil theft. The strategies may involve increasing surveillance, deploying advanced monitoring systems, and improving coordination among security agencies.

2. COLLABORATION WITH INTERNATIONAL PARTNERS: Oil theft is a big business, it is more regional and international. Nigeria should collaborate with international partners to combat oil theft. Information sharing, capacity building and joint operations can help disrupt transnational criminal networks involved in oil theft.

3. COMMUNITY ENGAGEMENT: This is one of the most important factors as it permeates the grassroots. Engaging local communities and providing alternative livelihood options can help reduce their reliance on oil theft for income generation. This includes promoting entrepreneurship, vocational training, youth employment, skills acquisition, and sustainable development initiatives.

4. LEGAL REFORMS: Nigeria operates the Rule of Law, and by virtue of this, all actions must be carried out according. Strengthening existing laws and imposing stricter penalties for oil theft offences can act as deterrence. This should be accompanied by an efficient judicial system that ensures speedy trial, prosecution and punishment of offenders. The Judiciary must rise like Daniel, to salvage the situation by dispensing justice without fear or favour, malice or ill-will.

5. NEED TO LEGALISE SMALL SCALE REFINERIES: There is the urgent need to legalise refinery by small scale back water factories, subject to standards and bench mark being given and monitored. This will stop their bad products finding their way into the market (as they do anyway), know innocent consumer’s motor engines. Afterall, Biafra was already refining oil as far back as 1967 (56 years ago) during the three year bloody Nigerian- Biafran Civil War.

CONCLUSION

Oil theft is an enigma to the Nigerian economy and security, the need to prevent same, cannot be overemphasized. The Nigerian government in collaboration in the oil, security, and economic sector must form a synergy to eradicate this cankerworm eating up the flesh of the wellbeing of the Nigerian- state, which is supposed to be an Eldorado.

(The end)

THOUGHT FOR THE WEEK

“A century ago, petroleum – what we call oil – was just an obscure commodity; today it is almost as vital to human existence as water”. (James Buchan).

By Prof Mike Ozekhome SAN

INTRODUCTION

We commenced this series last week with a detailed introduction of the subject matter, later we took a look at the history of oil exploration in Nigeria, where oil theft is carried out in Nigeria and those involved in oil theft in Nigeria. Today, we shall continue to x-ray the involvement of the military and other security forces, resident oil companies and the local populace. We shall also try to find out why and how oil theft is being carried out and later the cost of oil theft in Nigeria. Please read on.

MILITARY AND OTHER SECURITY FORCES (CONTINUES)

MILITANT ORGANIZATIONS

According to former Nigerian president Olusegun Obasanjo, militant organizations have often been used by “political godfathers” in the oil sector regions to cause disturbances in regional stability. These ales the whole process to enjoy less supervision by the government. This is disturbing, and considering the poverty rate of citizens according to the World Bank Index, joining any of these groups would mean a breakthrough and great deal as the reward is juicy. These groups primarily serve as armed escorts for the property of the political elite or function as the sabotage mechanism that is necessary for cold-tapping operations.

Due to the large success of the Niger Delta militant operations, Nigeria’s annual output of crude oil decreased from its potential capacity of 2.2 million barrels per day to 1.4. As a consequence of the high influx of oil pipeline sabotage in the Niger Delta, oil spills “devastated mangroves, contaminated soil and groundwater, destroyed the fish habitat, and posed a serious threat to public health.” Buhari failed in his fight against corruption, it was a selective fight.

RESIDENT OIL COMPANIES

Resident oil companies have also been fully involved in oil theft. The means of oil theft – hot and cold tapping – being very complex and dangerous, demands expert knowledge to implement same successfully. Resident oil authorities from multinational oil corporation stationed in oil sectors regions of Nigeria play key roles in facilitating this theft. In addition to providing technical expertise and managing oil withdrawal operations, oil experts offer inside knowledge on the schedule of corporate inspection operations on the pipelines. This is critical for ensuring that illegal secondary pipelines stay intact and that the location of fueling operations are not revealed to Nigerian security forces and multinational corporate authorities.

THE LOCAL POPULACE

It is pitiable and regrettable that the local populace that surrounds the variety of oil pipelines throughout Nigeria often facilitates the local creation and sale of illegally refined oil products as means of alleviating their impoverished condition. Same unscrupulous citizens make use of small-scale oil tapping to collect crude products. Their methods of extraction have contributed largely to pollution in Nigeria. This is due to their lack of technical expertise. In addition to oil pipeline leakages from small-scale tapping, the JTF’s anti-refinery and illegal oil market operations have led to uncontrolled destruction of illegal crude oil reserves. Due to the simple construction of bush refineries and their placement in isolated locations, all efforts by the JTF to mitigate the illegal refinement of oil products have largely been futile. In September 2018, the unemployment rate in Nigeria had reached 23%.

Consequently, in tandem with the high unemployment rate, the pollution of waterways and the contamination of local fish populations forced many young Nigerians to partake in oil theft and illegal refinery activities.

WHY DO THEY STEAL NIGERIA BLIND?

The why of oil theft is so elementary that it can be excused for – why do people steal? The answer is obvious. Theft generally may be as a result of lust, greed, avarice, wickedness, etc. People engage in stealing for diverse reasons. It may even be retaliation or set up. But as regards oil theft, a theft that involves so much expenses to embark on, a theft that involves the conglomeration of human and mechanical know-how, why would a wealthy man invest in oil theft? The reasons may not be farfetched. It may be for increase of wealth; control of economic power; societal recognition; etc. But have you ever thought that, it may be for “political power”? Some of the moguls involve in oil theft do that for political power and protection; and to get international illegal gains. Religious and ethnic sentiments may also be a reason for oil theft; but this is a different and more advanced rationale.

HOW IS THE OIL THEFT CARRIED OUT?

There are different means and methods of oil theft. There are both simple and sophisticated means, but for purposes of this discourse, we shall consider hot tapping, cold tapping and terminal and transportation theft.

Hot-tapping and cold-tapping are extremely sophisticated methods of oil theft and are primarily used in large-scale operations during the crude oil stage. Terminal and vehicle transportation theft involves the re-appropriation of both crude and refined oil products from storage facilities during the process of export transportation.

According to Mr. Mele Kyari, the Group Managing Director (GMD) of NNPCL, the illegal pipeline taps are so sophisticated now that in some cases, they run for 3-4 kilometers and would have involved cranes, and at least 40 workers to build. In fact, to your dismay, an illegal line alone which measures less than 200km, had not less than 295 illegal connections. He also revealed that the rate of theft forced the shutdown of two production fields.

Let’s proceed with the discourse.

HOT – TAPPING

Hot – tapping involved the attachment of an illegal secondary pipeline belonging to oil theft criminals to a high-pressure primary pipeline belonging to a multinational corporation. Thereafter, oil is diverted from the pipeline into to mobile oil bunkering facilities that are attached to the secondary pipeline. This process is normally difficult to discover because, the gradual withdrawal of small amounts of the oil normalizes the high-pressure from the primary pipeline. The process although gradual, is capable of withdrawing oil to fill thousands of metric tons in few hours. The process is very complex and dangerous, and has led to many disastrous events.

COLD TAPPING

Here, a portion of a pipeline is blown up, then a secondary pipeline is attached to the shut-down primary pipeline. It is also difficult to discover this kind of tapping, because, after the primary pipeline is repaired, the flow and pressure still remains same. This process is less dangerous.

TERMINAL AND VEHICULAR TRANSPORTION THEFT

Oil theft is common in the production states. However, it is easier and more rampant at port terminals. Transportation of crude oil at terminals awaiting shipments to international locations are met with serious diversion. During this process, siphoning is facilitated by the corporation of administrators and security agencies. There are reserved into criminal fuel trucks, and then, the trucks are used to transport illegal oil products for sales in neighboring African countries where prices are higher with or without subsidy. The lack of oil meters at the source of production and physical presence only at export facilities by oil corporations, is a lacuna, and thus disrupts the oversights in managing and accounting for the initial value of oil produce an – initio.

THE HUGE COST OF OIL THEFT IN NIGERIA

In the third quarter of 2022, operators of the Trans Niger pipeline and the Forcados export terminal closed their facilities for repairs. The closures triggered a sharp drop in Nigeria’s crude oil output from 1.1 million barrels per day (b/d) in the second quarter to below 1 million b/d in the third quarter. Nigeria’s production recovered by the beginning of 2023; but an oil workers’ strike disrupted production again in April, 2023. Crude oil production in Nigeria fell to slightly more than 1 million b/d in April of this year, dropping below Angola’s production, which was estimated at 1.1 million b/d that month.

Nigeria lost about 13.21 million barrels of crude oil with an estimated worth of N603.64bn between January and August this year, an analysis of the monthly reports of the country’s crude oil and condensate production showed.

Against the 1.69 million barrels per day oil production benchmark in the 2023 budget, Nigeria recorded an output deficit of about 23.7 million barrels of crude oil production in January and February 2023, valued at about N920 billion at the official exchange rate of N460/$; and about # 1.840 Trillion at the black market rate.

According to an analysis of the data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in August, Nigeria’s total oil production shortfall hit 94.5 million barrels in the first half of 2023. When converted to money, the output slump would be an estimated gross revenue loss of $7.1 billion at an average oil price of $75 per barrel during the period between January to June this year.

Nigeria is at the moment, desperately in need of foreign exchange as currently reflected in the weakening value of the naira to the dollar and inability of foreign investors, especially airlines to repatriate funds to their countries of origin.

Few weeks ago, OPEC slashed Nigeria’s production baseline to 1.38 million barrels per day for 2024, due to the prolonged inability of the country to consistently meet its quota for the commodity. And, Nigeria gets over 90 per cent of its foreign exchange earnings from the export of the commodity.

To be continued…

THOUGHT FOR THE WEEK

“A century ago, petroleum – what we call oil – was just an obscure commodity; today it is almost as vital to human existence as water”. (James Buchan).

Prof Mike Ozekhome SAN

INTRODUCTION

Nigeria is naturally blessed and endowed amongst the comity of nations, this is notwithstanding her chequered colonial history, and the fight for nationalism. As the largest black race in Africa, often referred to as – “the big brother”, she is blessed beyond measures, but regrettably – beyond resource control. The presence of crude oil in the Nigerian soil has made it topical issues de – die – in – diem. The clamour for equitable and fair benefits of same, led to economic and security disruption by some indigenous groups in the Niger Delta region. The region has been the centre of environment encroachment and degradation, inhumane living conditions and zero attention by the government and multi-national companies on concessions. Life in this region is – brutish, nasty, solitary and wicked. Life is almost unbearable by the residents. The lack of democracy, the dividends and concern by government, couple with greedy influential elites, led to rapid and religious oil theft, bunkering and vandalization of oil pipelines in the region. This vista discusses oil theft in Nigeria, where it takes place, how it takes place, who commits this theft, why the theft, and the attendant cost of same to the economic future of the nation.

Nigeria, the giant of Africa, is the second largest oil and gas producer in Africa. Crude oil is majorly produced from the Niger Delta basin in two types: light, and comparatively heavy. The lighter has around 36 gravities while the heavier has 20–25 gravities. Both types are paraffinic and low in Sulphur. Throughout successive years, incomes and revenues generated from the oil and gas sector have accounted largely for supporting the economy and budget of the nation. The income and revenues also account for high level of the entire Gross Domestic Product (GDP). Nigeria is a major exporter of crude oil and petroleum resources to the United States of America. In 2010, Nigeria exported over one million barrels per day to the US, representing 9% of the U.S total crude oil and petroleum products.

HISTORY OF OIL EXPLORATION

Oil exploration originally dates back to 1903, when the Nigerian Bitumen Corporation carried out exploration in the Niger Delta territory. However, the firm’s operations were stopped due World War 1. Later, licences were granted to D’Arcy Exploration Company and Whitehall Petroleum, but same were returned by 1923 due to lack of discovery of oil in commercial quantity. There was an association of Shell D’Arcy Petroleum Development Company of Nigeria, a consortium of Shel and BP – which commenced work 1937. Oil drilling commenced during 1951 in Owerri, and non – commercial quantity was discovered in Akata, near Eket in 1953.

In a bid to discover oil in commercial quantity, the Oloibiri oilfield was discovered in May, 1956. The Oloibiri Oilfield is an onshore oilfield located in Oloibiri in Ogbia LGA of Bayelsa State, Nigeria. It is located about 45 miles (72 km) east of Port Harcourt in the Niger Delta. The field is about 13.75 square kilometres (5.31 sq mi) and lies in a swamp within OML 29.

The field was originally operated by Shell D’Arcy, which changed its name to Shell-BP Petroleum Development Company of Nigeria Limited on 30th April, 1956. Currently, the field is operated by Shell Petroleum Development Company of Nigeria Limited (SPDC). Other wells discovered are the Afam and Bomu wells in Ogoni territory.

Towards the end of the 1950s, non-British firms were granted licence to explore for oil: Mobil in 1955, Tenneco in 1960, Gulf Oil, (later Chevron in 1961); Agip in 1962; and Elf in 1962. Prior to the discovery of oil, Nigeria (like many other African countries) strongly relied on agricultural exports to supply its economy. The first oil field at Oloibiri began production in 1958.

Now, it would have been naturally expected that, with these resources, Nigerian citizens would cry no more, and worry no more; but the reverse is the case. Government takes almost all the benefits; the citizens are left with nothing; while rich elites illegally smuggle oil out the country.

Having blazed the history, albeit briefly, we shall now embark on the kernel of this discourse, using the guide from the W3HC.

WHERE IS OIL THEFT CARRIED OUT?

Oil theft is actualized at different points of operations, ranging from the creeks, refineries, roads, waters, etc. It majorly takes place in states where oil is being produced. On July 27, 2023, Tribuneonline.ng.com reported that the Nigerian National Petroleum Company Limited (NNPCL) has disclosed that Nigeria recorded a total of 240 crude oil theft incidents in one week. It said between the 15th and 21st of July, 2023, the incidents were recorded at various parts of the Niger Delta. In a breakdown, it said out of the total incidents, 69 illegal refineries were discovered and destroyed in Uppata and Abua communities in Rivers State, alone.

Also, it said, 27 cases of pipeline vandalism cases were also recorded and repaired, while 30 wooden boats used to convey stolen crude were confiscated in the past week. Interestingly, 13 automatic identification system infractions were flagged using NNPC’s maritime intelligence system and has been escalated to the Navy through NNPCL’S Incidence Management and Reporting Application; while two illegal vessels were arrested and five cases of oil spills were recorded. Note that 13 of these incidences were recorded in the deep blue water; 41 of these incidences were recorded in the Western Region of the Niger- Delta. 169 recorded in the Central Region; while 17 took place in the Eastern part of the-Niger Delta oil-producing region.

Meanwhile, the NNPCL had earlier in July announced that a private security contractor it engaged (Tantila Ltd) intercepted an 800,000-liter capacity vessel with stolen crude oil. The Vessel, MT TURA II (IMO number: 6620462), owned by a Nigerian Registered Company, HOLAB MARITIME SERVICES LIMITED with Registration Number RC813311, was said to be heading to Cameroun with the Cargo when it was apprehended. It said preliminary investigations revealed that the crude oil cargo onboard was illegally sourced from a well jacket offshore in Ondo State, Nigeria.

In Delta State, thieves have built their own 4k.m- (2.5 mile) long pipeline through heavily guarded creeks to the Atlantic Ocean. There, barges and vessels are blatantly and professionally loaded with the stolen oil from a 24-foot rig visible from miles on the open waters.
How do we continue like this?

WHODUNIT?

To succeed in any oil theft, collaboration and firm synergy by species of participants and implementation of their various functions is sacrosanct. The process is situational and complex in nature, depending on the level of the oil theft in question. In large-scale and illegal oil bunkering, corrupt officials in the oil sector allow successful operations of theft. The most appalling fact is that our security agents serve as escort in transporting the stolen crude products. Also, most local citizens in the Niger Delta who are participants in the oil theft trade assist in the illegal refinery of stolen crude oil products and sell them at black markets in local villages.

Speaking during the ministerial briefing by the Presidential Communications team at the State House, Abuja in August, 2022, Melee Kyari fingered “high placed” Nigerians, including the religious/ community leaders and Government officials, as being fully involved in the theft. No names were mentioned. He also disclosed that stolen products were warehoused in churches and mosques with the knowledge of all members of the society, where the incidents occurred, including the clerics.

Prominent Niger Delta leader and former agitator, Mujahid Asari Dokubo, in Abuja, alleged that the bulk cases of oil theft recorded in the oil-rich region are traceable to the Nigerian Army and Navy.

“The military is at the centre of oil theft and we have to make this very clear to the Nigerian public that 99 per cent of oil theft can be traced to the Nigerian military, the Army and the Navy especially,” Dokubo told State House correspondents after he met Bola Tinubu behind closed doors at the Aso Rock Villa, Abuja. He continued thus: “We’re going to walk with an NPPCL and the IOCs to make sure that oil tapped is brought to zero.”, “The blackmail of the Nigerian state by the Nigerian military is shameful. They said they do not have enough armament and people listen to these false narratives. So this blackmail must end. They have enough resources to fight.”

This is appalling, to say the least. Therefore, we shall examine the following as major accomplices in oil theft (bunkering):

MILITARY AND OTHER SECURITY FORCES

Upon the wake of large-scale production if oil, the presidency of Ibrahim Babangida from 1986 to 1993 and his appointment of officials to supervise the oil producing sectors, the Nigerian military has maintained extensive control over the crude oil trade. The military personnel and Joint-Task Force members that are involved in the illegal oil trade primarily serve as armed escorts for the stolen petroleum products during large-scale operations and gather the intelligence that is necessary for avoiding government probes in the region. Involved in this unholy trade are principally the Navy, supported by the Army, Airforce, Police, Customs, NDLEA, Civil Defence, Militants, Political Elites and Government Officials; Oil Companies; communities; local chiefs and sundry religious leaders.

The Nigerian Navy being charged with security on water, frequently and actively seize vessels containing stolen petroleum products from one destination to another. Regrettably, and Pitiably for this nation, accusations are being made against this security forces for oil theft facilitation. The disappearance of captured vessels and re-appropriated sets of seized products to foreign markets is a nagging problem. Also, security agents also pursue oil bunkering allegations against colleagues as means of absorbing sectors of the oil trade and strengthening individual positions in the regions. The albatross of these is that even these top officials are not being investigated and prosecuted, as they enjoy political immunity from the underdogs. The Buhari administration that promised to fight corruption, failed celebratedly. We are in a mess.

THOUGHT FOR THE WEEK

“A century ago, petroleum – what we call oil – was just an obscure commodity; today it is almost as vital to human existence as water”. (James Buchan).