Oil tanks

Chika Amanze-Nwachuku writes on the economic and environmental consequences of illicit oil theft in the Niger Delta and failure of the Nigerian government to follow through with the installation of an automated metering system at oil wells and other infrastructure in the region

Illegal oil bunkering has been a decade-long issue in Nigeria. However this worrisome problem and other criminal activities, such as illegal refineries and pipeline vandalism have been on the increase in recent times. Previous efforts by successive administrations to stem the criminal tide yielded little or no results as large volumes of Nigeria’s oil was stolen from the creeks of the Niger Delta, with culprits going unpunished.

Worried about the issue, former President Olusegun Obasanjo’s administration had in 2001 set up a special security committee on oil producing areas, with a target to, among others, identify the causes, possibly those behind the act, and to proffer solutions to the menace.

The committee had in its report then noted that “a major threat to Nigeria’s oil industry arises from activities of a 'cartel or mafia', comprising highly placed and powerful individuals within the society, who run a network of agents to steal crude oil and finished products from pipelines in the Niger Delta region.”

The committee also observed that those responsible for halting or diverting oil production and preventing free traffic on the waterways, "could be enjoying the patronage of some retired or serving military and security personnel.” It was also revealed that vessels used in the sordid deals were often seized by the army and navy, but their cargoes remained unaccounted for.

Also, in 2008, the late President, Umaru Musa Yar’Adua had appealed to the group of eight – that is, the G8 nations – for assistance on how to tackle the problem. Nigeria was said to have repeated the call at the United Nations in September that same year and again in Washington in December 2008 and March 2009. Despite all these efforts, activities of oil thieves in Nigeria have remained unabated.

Damning Data

A special report published in 2009 by the United States Institute of Peace, an independent, non-partisan institution established and funded by congress, had noted that between 30,000 and 300,000 barrels of oil per day was carted away by oil thieves in Niger Delta. In the report titled: ‘Blood Oil in the Niger Delta’, founder and executive director of Academic Associates PeaceWorks, Judith Burdin Asuni, disclosed that approximately $100 billion was lost from illegal oil bunkering between 2003 and 2008.

The report, which Asuni said was based on her extensive experience in the oil-rich region, where she had worked with Nigerian governments at the federal, state, and local levels, as well as the oil and gas companies, identified three types of illegal oil bunkering as small-scale pilfering for the local market; large-scale tapping of pipelines to fill large tankers for export; and excess lifting of crude oil beyond the licensed amount.

The report, which was also based on information from local communities; members of the armed groups in the region, as well as interviews with US, British, Dutch, and UN officials noted that the complexity of players in the illegal oil bunkering business, including local youths, members of the Nigerian military, political class, and foreign ship owners, makes it difficult to tackle the problem unilaterally.

Activities of oil thieves have led to the pollution of rivers and lands in the oil-rich region, resulting in the outbreak of diseases and deaths in some communities. But beyond environmental issues, this hydra-headed problem has continued to take a toll on the Nigerian economy.

An estimated 180,000 barrels of oil per day, approximately $7 billion yearly is lost to oil theft, according to recent information from the Petroleum Ministry.  Last month, the Nigerian National Petroleum Corporation (NNPC) revealed that the taskforce arrested vessels carrying 1.3 million barrels of stolen crude. The operatives also last month reportedly carried out 25 raids in Rivers and Bayelsa States and arrested 131 suspects.

The Commander 2 Brigade of the Nigerian Army and Sector 2 operation Pulo field, Brigadier General Tukur Burutai, disclosed that 96 illegal refineries, three marine vessels including NV Ane and NV Oxo, seven barges and 2,020 drums of adulterated petroleum products were recovered from the oil thieves.

The JTF operation Pulo field was set up in the wake of the rising oil theft in the region. The team, after the raids, said it destroyed items recovered from the scene, which included 180 GP tanks, 15 hoses, 33 jerry cans of petroleum products, 13 generating sets, 121 trucks, 21 reservoirs, each containing 20,000 litres of petroleum products, two gas cylinders and two speed boats.

A similar raid carried out in Edo and Delta States by a federal task force on pipeline vandalism led to the arrest of 29 persons. The commander of the task force, Mr. Sam Okaula, a Chief Superintendent of Police (CSP), was quoted in a report to have said the owner of a truck conveying the 53 drums of diesel was among those apprehended. Several tools, including drill devices, pumping machines, boat engines, clamps, wheel barrows and a variety of hoses used for oil theft were impounded by the taskforce.

In 2010 alone, the JTF had impounded vessels carrying 724 metric tonnes of stolen crude. About 6,000 illegal refineries were also said to have been destroyed by the operatives across Niger Delta, while more than 150 persons suspected to be involved in illegal bunkering were arrested.

Metering as Solution

What is worse is that over the years, the Central Bank of Nigeria, Ministry of Finance, Ministry of Petroleum Resources, Department of Petroleum Resources (DPR) and NNPC have given conflicting figures of how much oil is produced or exported by oil companies because there is no reliable monitoring system to determine the volume of oil lifted from the country. They only rely on figures quoted by the oil majors.

Concerned about the situation, late President Umaru Musa Yar’Adua, on assumption of office, had set up a committee to monitor crude oil production and exports. The committee chaired by former Minister of State for Petroleum Resources, Odein Ajumogobia, had recommended among other things, the installation of meters at flow stations and well heads as a way of determining or monitoring oil lifted from Nigeria.

Ajumogobia had noted that the decision to seek expert advice from Norway on the proper way of monitoring crude production and export quotas was sequel to reports of rising theft of Nigeria’s oil. He said based on Norwegian experts' advice, the committee concluded that it was important to have meters installed at the flow stations and wellheads to monitor the volume of crude oil being produced or exported by companies.

The minister said apart from installing electronic pump metering, there were also some proposals to have third parties being appointed to monitor quantum of production and exports.  

Truncating Automated Metering

But in a startling revelation in June 2009, Petroleum Cooperation Coordinator in the Norwegian Embassy in Nigeria, Halvor Musaeus, alleged that some people were kicking against the effective monitoring of crude oil exports. He acknowledged that the Norwegian government has the technology to stem the huge revenue losses incurred by Nigerian government in crude oil exports occasioned by sharp practices, but that some people within the system were making it difficult for it to be used in Nigeria.

“We want to put the system in place (here in Nigeria) but some others sitting somewhere do not want these things,” he said. He said in Norway where most of the exploration was done offshore, the infrastructure had been built offshore.

According to him, “It is very difficult to hide anything. Produced oil is put in vessels. It is very easy to know what goes on in the ships and then oil and gas is transported by pipelines and it is easy to know what goes into pipelines.”

He said it was important for Nigeria to have data of how much oil is being produced from the different oil wells because the figure was no longer clear to anyone. He explained further: “There are too many wells. You need to have metering at these wells. You also have flow stations close to the wells. You can meter there and meter again at the point of export terminals and know how much has been lost in transportation. Today, you only have metering system at the outlet of the terminals.”

What this means, he explained, was that “you know how much is exported but do not know what might have been diverted from the pipelines and production wells.” 

Chairman of the National Taskforce on Petroleum Revenue, Nuhu Ribadu, at a recent oil and gas forum in Abuja also noted that meter installations at wellheads and export terminals would be the surest way to check activities of oil thieves. He, however, said all that was really needed in the fight against oil theft was seriousness and courage.

Finding the Political Will

In what appears as a lasting solution, the federal government is said to be considering the use of highly sophisticated technology to track down oil thieves.

It was learnt that the move followed fresh concerns that the escalating illegal oil trade is not only harming the economy, but undermines security in the Gulf of Guinea and adds to instability in the world energy market.

NNPC’s Acting Group General Manager, Group Public Affairs Division, Mr. Fidel Pepple, confirmed last week that far-reaching measures were being put in place by the corporation, oil companies and the taskforce to stem illegal oil bunkering and crude theft in the country.

Although industry experts view the use of sophisticated technology as a welcome development, analysts fear that this arrangement may not see the light of the day, given that the planned electronic pump metering system, which was proffered as a solution in 2006, was not been implemented, as the move was frustrated by those behind the sordid deals.

Industry stakeholders who spoke at the weekend doubted the government’s sincerity to effectively address the illegal oil trade, given that efforts made by Norway in the past six years to assist Nigeria in fighting the menace has been rebuffed.