Nigeria – Oil Thefts on an Unprecedented Scale

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As the army begins operations to combat oil theft in southern states, the scale of corruption in the industry and its impact on the economy, become clear.

On September 2nd the Nigerian army uncovered a large-scale illegal bunkering site in Makoba beach, around a mile from the Rivers Port Complex in Port Harcourt, the capital of southern oil-producing Rivers State. According to Commander of the 2nd Brigade, Brigadier-General Stevenson Olabanji, 13 suspects were arrested, reported Nigerian daily Leadership.

“At the site, we found over 5,000 drums loaded with illegally refined diesel; four tanker trucks containing 132,000 litres of diesel combined, and a badge with 165,000 litres of stolen diesel. This discovery is unprecedented because since we started our operations 10 days ago, this is about the biggest that we have uncovered”, Olabanji commented.

Olabanji explained that the illegal bunkering site has not yet been destroyed in accordance with the Joint Task Force (JTF) mandate because of its close proximity to residential buildings and the port complex; “we cannot do this because it will degrade the environment and affect residents as it is situated in the heart of Port Harcourt. Our plan is to move them to a safe location for destruction”, he said.

Also on September 2nd, the Chief of Naval Staff (CNS), Vice Admiral Ibok Ibas, issued a statement warning of “stiff penalties” for ship owners involved in crude oil theft. Speaking to the Nigerian Ship Owners Association he said that the vessels involved in the criminal activities would be treated as saboteurs, reported Nigerian daily This Day.

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Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr Emmanuel Kachikwu, cited by Vanguard on September 2nd, issued an ultimatum, setting an eight-month deadline for the eradication of oil theft, with measures including the introduction of drones to monitor pipelines and patrol coastal areas, enhancing the capabilities of security services.

“Oil theft is a major issue for us. We lose on average of about 50,000 barrels of oil. We lose about US$3-4bn of revenue and that is just in terms of crude oil itself. When you get to pipelines, most of our pipelines are ruptured and attacked fairly frequently. Last year alone, between June 2014 and June 2015, we recorded between 3,400 to 4,000 attacks on the various pipelines in the country. The effect is a shut-in of about 250,000 barrels a day (bpd) and when you calculate that, you have a net loss of over $7bn”, said Kachikwu.

“The pipelines that traverse our country which are supposed to carry crude into our refineries are perpetually harassed and the net effect is that we resorted to using marines to carry cargoes into our refineries….In the last one year, we have lost about 350 lives – NNPC staff, policemen, community members – as a result of attempts to breach these pipelines”, he continued.

The Daily Trust newspaper documents the story of a man known as Okon Mbom, in Orika local government area in Rivers State, who receives Naira 10,000 from operatives deep in the forests, although he is aware that his employers were not government officials, he does not mind as long as he receives a fee at the end of the day.

Thieves use a variety of methods; one method, hot tapping, involves drilling and clamping a valve to avoid spills and explosions, creating a diversion from the main pipeline. Another method involves hand drills and soldering, working while pumping is stopped by pumping station personnel. Another, the “Cock and Shop” method,  is a slow method of corroding the pipeline by using concentrated acid, when the pipeline is corroded a spike is used to burst the pipeline, which sometimes results in an explosion.

On July 29th the Nigeria Extractive Industries Transparency Initiative (NEITI) declared that about US$25.3bn of the nation’s oil money had gone missing over the last eight years, reported Leadership. Oil thieves in the Niger Delta, taking an estimated 180,000bpd, constitute the 12th largest oil producing group in Africa, generating revenue that exceeds the GDP of 15 different African countries. UK-based think-tank Chatham House said that “oil is being stolen on an ‘industrial scale’ in Nigeria and the country’s politicians and security officials are among those profiting”.

A 2014 report by oilprice.com, cited by Leadership, stated that Nigeria tops the list of countries plagued by oil theft, with around 7.7% of GDP vanishing each year, more than the country spends on education and healthcare combined;”The numbers paint a harsh picture about the inability of the Nigerian government, and the multinational oil companies in the Niger Delta, to do anything about this rampant theft” the report said.

Petroleum thefts are a huge issue for Nigeria and one that newly elected Muhammadu Buhari has vowed to combat, a feat his predecessor Goodluck Jonathan failed to achieve; with corruption rife and many officials themselves benefiting, it does not seem like it will be an easy task.

Find out more in the Africa Research Bulletin

NIGERIA: Fighting Graft, Buhari-Style
Economic, Financial & Technical Series
Volume 52, Issue 7, Pp.20919C–20921C

NIGERIA: Oil Sector Under Spotlight
Economic, Financial & Technical Series
Volume.52, Issue.6, Pp.20883B–20884B
Nigeria – Deadly Pipeline Blast
Economic, Financial & Technical Series
Volume.52, Issue.6, Pp.20884B
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