Nigeria’s Big Challenge: Curbing Crude Oil Theft

By Ackilis Charles

Curbing crude oil theft ‘a war that must be won collectively to save our future’.

Nigeria is the sixth largest oil producing country in the world with a capacity of 2.5 million barrels per day (bpd) and potentially the largest petroleum sector in Africa.

The sector is plagued with complex but interwoven challenges spanning across insecurity, regulatory, political and socio-economic exigencies. Of all these, crude oil theft has been one arduous problem with its impact being felt across the length and breadth of the country and thus, should be made a national priority.

Crude oil theft is a global epidemic that has bedeviled a lot of oil producing countries and hence, an aspect of global terrorism not just native to Nigeria. Unfortunately for us over here, we seem to be worse hit, as according to data gotten from oilprice.com, Nigeria in 2014 was ranked ahead of Mexico, Iraq, Russia and Indonesia on an index of top five countries mostly plagued by oil theft.

Crude oil theft evolved into a cottage industry in the early 2000’s, creating huge socio-economic problems and with global oil price rising above $100 per barrel, the illicit albeit booming enterprise reached its climax between 2011 – 2014. In 2016, reports suggest about N3.8 trillion losses were recorded by the international oil corporations (IOC’s) and government due to crude oil theft, pipeline vandalism and sabotage.

Therefore, crude oil theft poses a significant threat to the socio-economic stability of communities, states, and countries in which the menace is prevalent. Hence, a commiserate advocacy campaign is needed to heighten the level of consciousness of the host indigenous communities where this illicit business is being carried out.

Poverty, high rate of unemployment, poor governance, wide spread corruption in the system, neglect by the government and some IOC on environmental safety and effects of resource extraction in oil bearing communities has been argued by some as the driving factors and rationale behind involvement in crude oil theft.

Pipeline saboteurs bold enough to speak to the camera see their actions as economically rational, politically necessary, morally defensible and socially productive. They describe illegal oil bunkering as an entrepreneurial, free market response to local economic dysfunction, socioeconomic pressures, chronic fuel and energy shortages in the region and government’s failure to deliver basic public services.

As much as some of these listed inadequacies might be true, resorting to hydrocarbon theft is equivalent to trying to solve a problem with a problem, which is unacceptable in any sane society as anarchy can never be a solution to injustice. Instead it begets other vices that could have negative effects on the country.

There are several categories of crude oil theft in existence. Three of the most common are as follows;

• Small scale pipeline tapping/well head theft
• Large scale illegal bunkering
• Over lifting/under declaration at export terminals

While the three types are not mutually exclusive, they however do have different sources, actors, markets and revenue streams. Some findings have highlighted the complicity and increased cooperation between militant elements, state actors, oil companies in some of these categories of theft, as there have been little deterrence from enforcement agencies.

Crude oil theft albeit lucrative comes with immeasurable environment and social degradation, economic and security instability, health hazards, destruction of energy infrastructure resulting in huge resources being expended on repairs, investor apathy and hence low developmental prospects.

Statistics of the volume of crude lost to theft and its direct bearing on the communities and general polity has been difficult to access, as the sectors dealing is shrouded in secrecy and thus unavailability of synchronized data that could be deemed reliable. Nevertheless, anecdotal evidences were used to arrive at estimates of the impact and effect of this hydra headed national conundrum.

Assessment by Nigeria Natural Resource Center (NNRC) reported that losses due to crude theft and pipeline infractions as of the first quarter of 2108 averages at about 300,000 bpd with about 200,000 potentially stolen while the remainder is lost to shut-ins from pipeline damage, downtime and differed productions.

The impact of such losses is enormous and translates to severe revenue shortage for the federal government with estimate putting it at around N995.2 billion per annum. This estimate is greater than the combined allocations for health and education in the 2018 budget. Environmental damage, security cost and loss of investment as a consequence of crude theft was estimated at around $55 billion over the last decade.

Owing to the combination of negative downturn in global crude prices and low production output (majorly due to resource theft and vandalism), national debt levels did soar as the country had to borrow to finance budget deficit due to revenue shortfall against budget projections.

With limited education and refining expertise, refining operations by locals involved in oil bunkering do contribute to large scale environmental damage as this is done in the creeks with no proper channels for waste disposal, hence polluting the delta, burning down plants life and so on. In addition, products from their artisanal firewood refineries are deemed to be substandard by state authorities and occasionally destroyed.

In situations where stolen crude was not refined locally for communal consumption or sales, the proceeds from this blacklisted but thriving enterprise could be a key source of funding to militants and other armed groups who trade them for ammunitions, thus, threatening the security and political stability of those regions.

IOC’s over the years have fallen short of international best practices stipulated to ensure minimal environmental degradation. This has somewhat led to oil spillage and seepages destroying vast kilometers of lands, farms, polluting the waters and thus, killing off the source to feeding and livelihood of the indigenes of the host communities. Also, gas flaring which has been a tradition for most of these IOC’s has been found to have negative effect on the atmosphere.

Efforts to curb this epidemic and address it root cause(s) and not just the symptoms have in most cases been poorly conceived, unsustainable and inadequately implemented. At federal level, government response to crude theft have been usually reactionary instead of precautionary.

In addition, weak government institutions and lack of political will to call some of the ailing IOC’s to order was highlighted when a Dutch appeal court seated at the Hague ruled that Shell could be held liable for oil spills in Nigeria despite the firms claim that it was caused by sabotage.

Sequel to a media chat by New Nigeria Foundation (NNF), a non-governmental organisation (NGO) championing an advocacy program against crude oil theft, participants present unanimously agreed that the media, elites and influential state actors have a very important role to play in curbing oil theft, as this is a war that must be won collectively in order to secure our future.

Information is a powerful tool when properly harnessed. This should be used to attract the attention of stakeholders (government, oil corporations, middlemen in the oil and gas value chain and indigenes of oil bearing communities) to the devastating effect of this illicit albeit booming business down south and the need to not embark or continue in sabotaging the economy of the nation and also endangering their lives.

The media do play an important role in forming public opinion and thus should be used as an avenue to educate the youths, our mothers and the elderly against either engaging in oil bunkering or shielding the perpetrators because of communal sentiment or angst against the government. Also, locals should be educated on the impact and effects of crude theft on their health, environment and posterity, as it could take decades to clean up and reclaim vast kilometers of land or water made and still being made inhabitable.

Detailed investigation anchored by both public and private media bodies, NGO’s and other interested data mining corporations should be embarked on, as it could help bring to the fore, the scale and depth of crude theft/illegal bunkering in the petroleum upstream and downstream sectors.

Also, the media should write, report and expose corruption in the petroleum and maritime sectors as those charged with the obligation to police and guard against some of these illicit activities are somewhat complicit and supposedly aiding or abating these economic saboteurs for personal/communal gains.

The media should provide an alternative platform to the voiceless in host communities suffering environmental hazards plus other costs that comes with petroleum exploitative activities. Majority of local inhabitants live in penury despite the huge amount of resources being lifted from there and this they attribute to neglect by the authorities.

Well lettered countrymen, elites in the bracket of community, state and federal ambassadorial positions, veterans and elder statesmen should engage the government and bodies responsible for the welfare, safety and security of these host communities on the need to govern better, initiate people friendly policies, purge itself of corruption, adequately man and secure our waters and pipelines.

Government at the federal level should also engage in bilateral agreements with neighbouring countries where stolen crude sales could be made in order to block supply channels and make crude theft less lucrative for persistent criminal elements.

Charles Maduabueke, BSc in geology and mining, wrote from Lagos.