Updated: Crude oil theft remains bottleneck for Nigeria’s oil, gas companies

Nigeria is Africa’s biggest oil producer but loses a significant portion of its crude oil the moment it is put in pipelines for export.

Oil theft, also known as illegal bunkering and pipeline vandalism, has resulted in significant loss of the nation’s revenue as well as the revenue and cash flow of indigenous companies who, like the Federal Government, also have huge debts to service.

Every international oil company (IOC) in Nigeria has been affected, one way or another, by the activities of oil thieves who engage in illegal bunkering and local crude oil refining operations, Esimaje Brikinn, general manager, policy, government and public affairs, Chevron Nigeria Ltd, said at a panel discussion on ‘Innovative Strategies – Combating Crude Oil Theft & Pipeline Vandalism’ at the Nigerian Oil and Gas conference and exhibition (NOG) in Abuja in July 2018.
“Oil theft remains an issue for the indigenous producers. It is one of the biggest challenges threatening business profitability and continuity in the upstream operating environment,”

Victor Okoronkwo, GMD of Aiteo Eastern E&P Ltd, told BusinessDay in an exclusive interview.
Deep in the labyrinths of oil-rich Niger Delta’s creeks, thieves tap pipelines and siphon the crude via rubber hoses up to 2km long into barrels aboard small crafts. They then sail alongside larger vessels, allowing the contraband to be pumped ship-to-ship into oil tankers bound for export, usually to Asia, mixed imperceptibly in a ratio as small as 10 percent with the legitimate product.

A report commissioned by the Nigerian Natural Resource Charter (NNRC) shows that Nigeria lost about N3.8trn in 2016 (over 50 percent of the country’s budget for that year) and N995bn in 2017 due to crude theft.

Ten months ago, two oil and gas pipelines exploded in Nigeria’s south-eastern state of Abia within 72 hours and claimed at least 60 lives. The pipeline belonged to the state-owned oil company, Nigerian National Petroleum Corporation (NNPC). Villagers were believed to have been skimming oil from a leak in the pipeline when the explosion occurred and ignited a massive fire.
In addition to these financial losses oil companies and the Federal Government suffer from these thefts, there is environmental degradation due to the pipeline leakages and proliferation of illegal crude refineries.

Shell recorded 128 oil spills resulting from sabotage in 2018, more than double the previous year’s and the highest since 2014.

Keen observers of the industry have identified poverty, unemployment, poor governance, pervasive corruption and the neglect of the Niger Delta region as major reasons for the emergence and sustenance of oil theft over time.

“Nigeria loses over 10-15 percent of crude oil to pipeline vandalism and crude theft. When you factor in about 90 days needed to bring back on-stream shut-in pipelines, we are talking large magnitude of losses,” Abdulrazaq Isa, chairman and chief executive officer of Waltlersmith Limited, an indigenous exploration and production (E&P) company, said in a separate interview with BusinessDay.

Experts have said securing critical national oil and gas infrastructure has become a matter of national security. Some have emphasised the value of participatory partnerships.

Chevron, an international oil giant, has long evolved a proactive approach by involving relevant stakeholders including the government security agents, relevant state governments and the Regional Development Committees (RDCs) under the Global Memorandum of Understanding (GMoU), a community-driven multi-stakeholder participatory partnership model for community engagement and sustainable development in the company’s areas of operations, Brikinn said.

Four months ago, Africa’s top oil exporter turned to French data firm Kpler, just six years old and staffed by a hundred mostly young employees, to help it ferret out the smugglers from the thousands of ships plying Nigerian waters.

The platform, known as the Community Pipeline and Facilities Surveillance Programme (CPFSP), with strong governance has become a model for enhancing the fight against oil theft and pipeline sabotage, enhancing multi-stakeholder partnerships and collaboration and providing sustainable social licence for oil and gas operations.

 

STEPHEN ONYEKWELU