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IOCs and Indigenous Company Players Wade in on Oil Theft at NOG

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.Collaboration, Detection Technology Key to Solving Oil Theft: Oando Boss


Vandalism in Nigeria has evolved from petty thievery to sophisticated, organized crime funded by cabals with access routes, processes and markets for smuggling and disposing stolen crude.


According to the monthly oil market report of the Organisation of Petroleum Exporting Countries (OPEC) for June 2022, Nigeria’s oil production crashed by about 14.94 million barrels in the second quarter of this year. An analysis of figures released by OPEC and the average cost of crude in Q2 2022 obtained from global oil price reports, indicated that Nigeria’s oil earnings plunged by about $1.696bn, being the worth of the 14. 94 million barrels of crude that were lost during the review period. The figure is a far cry from the 1.766 million barrels of crude oil per day that was allocated to Nigeria as production quota for June by OPEC. Little wonder this was the crux of discussion at the recently concluded Nigeria Oil & Gas Conference.


Speaking on a panel at the NOG conference, Iroghama Ogbeifun, Chief Executive Officer, Starz Investment Company Limited, opined a divergent view. She explained that vandalism and oil theft may also be a strategy by some oil operators to avoid tax and tariffs, airing the possibility that for some, the vandalization they experience is self-inflicted.


Echoing Iroghama views at the event Managing Director of Chevron Nigeria/Mid Africa Business Unit, Richard Kennedy said “From my experience, the issue with crude oil theft should not be confused with host community issues. It is much bigger than that. It is completely different from host community issues. Quite frankly it is organized crime” in a panel session held at the recently concluded NOG Conference. He also revealed that the level of theft is costing Nigeria millions of dollars daily in lost revenue which could have helped solve our fiscal challenges.”


According to him, “The volume of crude that is being stolen is well beyond comprehension. You can see some of the figures in the press, maybe it’s about 100,000 barrels per day at $100 per barrel and that’s $10 million per day that is being stolen. And NNPC owns 60% while taxes of 85% are paid so it’s a huge loss for the country.”


Speaking during the industry leaders’ panel session on “The future of Nigeria’s energy sector in the Petroleum Industry Act (PIA) era”, Mike Sangster, the Managing Director, TotalEnergies EP Nigeria said TotalEnergies had declared a force majeure on its OML 58 and had stopped production on February 24 due to the vandalism of its oil and gas infrastructure.


He noted that the PIA had made provision for the Host Community Trust Fund which was a step in the right direction to empower the local communities and ensure a clear and consistent framework across the industry. Sangster said this would not put an immediate end to activities of crude oil thieves and pipeline vandals which had transcended into an organised crime, disrupting the operations of oil and gas companies.


Speaking on ways to curb vandalism and oil theft, Iroghama, recommended that the places where oil theft are most rampant be identified, and that modular refineries be deliberately situated in such areas to employ the natural refining skills of vandals. She concluded that ultimately, strong policing and judiciary ruling were the only solutions to this menace, highlighting this as the solution Brazil adopted to solve their vandalism problems.


Adewale Tinubu, Group Chief Executive, Oando PLC, in keynote speech, resolved that the solution lies in the collaboration between government and all industry stakeholders in addition to the deployment of surveillance, community policing and sabotage detection technology.


Adding to the solution, Abdulganiyu Adebomehin, Surveyor-General of the Federation, proposed the engagement of community youths as a part of the monitoring and support team and adopting sophisticated server and control rooms for monitoring. Other measures include the establishment of regulatory policies, surveying to monitor and manage operation operational processes, the installation of technology and warning systems to check pipelines and equipment tampering.


Sangster, therefore, urged the government and industry stakeholders to find a lasting solution to the issue of vandalism in order to make Nigeria an investment destination for oil and gas companies.


These vandalism and crude theft activities result in the degradation of the environment and impact the GDP of the nation, since oil remains Nigeria’s primary product of export. The cost of constant repairs, oil loss, spasmic production have frustrated many companies into shutting down oil wells and seen many IOCs leave the country. The unstable business environment these all creates discourages investment opportunities.


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