Concerns over Illegal bunkering: $3bn Oil Theft in Niger Delta Criminal, terrible says  Komolafe

 

. says Impacts on the Environment and the Nigerian Economy devastating

 

UGO AMADI

 

The Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) Mr Gbenga Komolafe, has described the massive theft of crude oil in the Niger Delta as criminal and terrible.

 

This is despite the efforts of the Federal government to curtail the illegal diversion of oil in the Niger Delta by increasing its security spending in recent years and devoting millions of naira annually to hire private security firms as well as equipping men and officers of the Nigeria Security sector saddled with the responsibility of protecting government facilities, incessant destruction of pipelines and other oil facilities across the country as well as trade in stolen oil by criminal cartels with international connections have continued unabated

It is worrisome that Illegal bunkering and Oil theft have continued to threaten the growth and survival of the Nigerian economy and has continued to cause pollution of the environment in the Niger Delta region. The combination of crude oil theft, illegal refining and pipeline vandalism has become a major threat to Nigeria in meeting the Government’s revenue projections in recent time.

The term illegal bunkering encompasses all acts involving oil theft, including diversion and smuggling of oil and unauthorized loading of ships. One common process requires tapping into an oil pipelines and well heads and transporting the oil elsewhere to be sold internationally or refined locally. To access the oil, a small group of welders will puncture a pipeline or well head at night, establishing a tapping point from which the group can operate.

Oil theft, and illegal bunkering occur throughout the Niger Delta. Leaks in pipelines in the Niger Delta are often caused by oil theft and operators have frequently declared force majeure on exports of key Nigerian crude grades. Oil spills and explosions are regular occurrences in the Niger Delta, as pipeline vandalism from bunkering leaves pipes especially vulnerable to leaks, spills, and major accidents.

Speaking on Arise Television, , the NUPRC helmsman stated that while over $2 billion worth of oil was estimated to have been illegally siphoned in 2021, when added to the first quarter of 2022, it could have climbed beyond $3 billion.

Recently, the Governor of the Central Bank of Nigeria (CBN) Godwin Emefiele, who spoke at the end of the 284th monetary policy committee (MPC) meeting in Abuja, blamed the trend of oil theft for the inability of Nigeria to meet its oil production quota.

 

Describing the situation as unprecedented, he stated that the occurrence had had a debilitating effect on government revenue and accretion to reserves, adding that the global prices have gone up and are compounded by the shortage of supply of petroleum products.

The association of indigenous exploration and production  companies, the Independent Petroleum Producers Group (IPPG), also a few weeks ago put it succinctly when it described the occurrence as an “existential threat.”

Chairman, IPPG, Mr Abdulrasaq Isa, speaking at the 5th Nigeria International Energy Summit (NIES), said that the challenge should be tackled before it finally kills the sector.

Also, weeks ago, Aiteo Eastern Exploration and Production Company (AEEPCO), operators of the Nembe Creek Trunk Line (NCTL) pipeline, threatened to exit the facility due to incessant vandalism, sabotage and outright theft.

In the same vein,  a Co-founder and former Chief Executive Officer of Seplat Energy Plc, Mr Austin Avuru as recently calling for a state of emergency in the Nigerian oil and gas sector, revealing that up to 80 per cent of oil pumped in the country, particularly in the East, is stolen.

Avuru’s comments came days after a businessman and Chairman Heirs Holdings, Mr Tony Elumelu, similarly bemoaned the worsening state of the industry, stressing that about 95 per cent of oil production does not get to the terminal.

Last week, the General Overseer of the Redeemed Christian Church of God (RCCG), Pastor Enoch Adeboye, warned that Nigeria might go bankrupt if the trend was not checked.

He also raised concerns over the country’s economic future, warning that Nigeria’s debt to service revenue ratio might pose danger for decades to come.

However, sp, Komolafe stated that it was not the duty of the commission to secure government oil and gas assets, stressing that the organisation does not “regulate” criminal activities.

“The commission does not regulate criminals, that’s not the mandate of the agency. It does not actually extend to dealing with criminal. We do not have the abrasive or the coercive machinery to subdue criminals. Our mandate actually covers technical and commercial regulatory functions,” he argued.

Komolafe noted that whatever affects the oil sector affects the health of the entire nation, reiterating that the upstream and downstream parts of the industry are facing challenges at the moment.

“What we’re witnessing has reached a very alarming situation, a very horrific situation,” he lamented.

Assessment of the effect on the Nigerian Economy and the Environment

According to Komolafe , getting investors to put their hard-earned money into the sector has been very difficult with the existing harsh conditions , including the theft of the commodity by saboteurs. “It is worrisome due to the activities of these criminals,” he lamented.

By rough estimates , the NUPRC had said that Nigeria lost more than 115,000 barrels per day (bpd) to oil theft and vandalism between January 2021 and February 2022.

 

Komolafe reiterated that the NUPRC had established a panel to audit the activities of operators in the upstream sector to ascertain the actual volume of oil lost to the menace.

It has also been reported that every day, oil companies in Nigeria lose between 300,000 and 400,000 barrels of oil to illegal theft. Theft accounts for roughly 15 percent of total number of barrels per day produced. Although estimates of how much oil is stolen per day in Nigeria vary, the British think-tank ‘Chatham House’ reports that over 100,000 barrels of oil were estimated to be stolen per day. Also, the United Nations Security Council estimates that Nigeria lost $2.8 billion of revenue to oil theft in 2017.

Oil export revenue accounts for 70 percent of Nigeria’s total government revenue and 95 percent of the country’s export income. A loss of 300,000 barrels a day costs the government roughly $1.7 billion a month. In comparison, only 5,000 to 10,000 barrels are stolen per day in Mexico, which produces a comparable amount of oil. Despite efforts by the Nigerian government to curtail bunkering by increasing security, theft and pipeline vandalism continues.

It has been reported that roughly a quarter of stolen crude oil is sold locally. Illegal artisanal refineries located in the Niger Delta “cook” the crude into separate petroleum products. The product yields 2 percent petrol, 2 percent kerosene, and 41 percent diesel. The remaining 55 percent of crude goes to waste, most of which is dumped into the nearby water or into a shallow pit, resulting in environmental and health  hazards

The impact of these criminal activities on the safety of people and the environment is huge. This   includes degraded local environments, pollution of  the environment at tap points. Over 50% of the crude oil siphoned in the process due to high pressure, besides waste of oil residues, are pumped into the creeks, rivers, farmlands, ponds, lakes, thereby blighting the environment further. The degradation to the environment occasioned by the illegal bunkering and oil theft, has reduced arable land for farming and has devastated fishing communities.

The Way Forward

Some analysts maintain that one solution to the issue of illegal bunkering is the establishment of modular refineries in the Niger Delta. The Federal Government has expressed commitment to pursuing the goal of establishing such refineries. A total of 38 licenses have been issued to prospective operators, ranging from high-scale refineries of 50,000 to 100,000 barrels per day. Reports show that out of these, about 10 of the modular refineries have advanced and they have all secured permit to construct.

However, Shell Nigeria has called for stakeholders’ concerted efforts to curb the incessant vandalism of crude oil-bearing pipelines, highlighting the danger of continuous sabotage to people and environment. The General Manager, External Relations of The Shell Petroleum Development Company (SPDC), Mr. Igo Weli, said such efforts to curb pipeline sabotage will save lives, secure communities and protect the environment.

Another stakeholder ,Mr Niyi Awodeji, who presented a report on oil theft by the Nigeria Natural Resource Charter (NNRC), during an advocacy against crude oil theft and stakeholders engagement seminar organised by the New Nigeria Foundation (NNP) in Port Harcourt, Rivers State noted  that Nigeria may continue to lose an estimated N995.2 billion yearly to crude oil theft except the Federal Government adopts efficient technology in metering and mapping movement of crude from extraction to exportation.

According to him the Federal Government should also enforce stringent penalties for oil thieves and their collaborators across the country. He argued that combating crude theft would not only end the loss of N995.2 billion yearly, but would result in increased oil production, export and revenue, thus paving way for economic diversification and investments.

He also identified inflated volumes from drilling, through production to receipt at the refinery allowed for by the oil industry saying this led to white collar’ crude theft by oil companies, as the practice occurs mainly at tank farms, refineries and distribution centres owned and operated the companies.

The truth of the matter is that until illegal bunkering and oil theft is reigned in, the Nigerian economy will continue to suffer the loss of revenue from thousands of barrels of oil every day. Perhaps more importantly and too often overlooked, the Nigerian people, especially generation yet unborn, will continue to cope with the consequences of their destroyed environment.