BusinessDay
NigeriaDecides2023

Nightmare over oil theft as academics lead search for way out

The mounting deaths in Nigeria’s oil region from fire disasters in blown out crude oil pipelines as well as the increasing loss of oil revenue to the tune of N60 trillion in one year may have created nightmares for the government, the oil industry and the academic world.

This has compelled Nigeria’s oil major, Shell Petroleum Development Company (SPDC) to support a research into the situation and look for solutions, anchored by an experienced professor of History at the University of Port Harcourt (UNIPORT), Ben Naanen.

One of such studies has been unveiled and the suggestion, shaky as it looks, is a strange recommendation for the Government of Nigeria to recognise and regularise the illegal oil refining operations that add to other oil thefts to cause a loss of between 200,000 and 470,000 barrels per day (bpd).

The deficit has affected Nigeria’s oil quota in the Oil Producing and Exporters Countries (OPEC) from reaching at least 1.8 mbpd.

The N60 trillion loss

Forests are daily being burnt out and coastal lines have since been destroyed by crude oil fires and pouring out of crude waste into the creeks. Researchers find that many kilometers of coastal areas are now totally condemned while fishing and farming have disappeared.

The research has been unveiled in Port Harcourt, Rivers State, revealing that Nigeria bleeds between N30 trillion and N60 trillion loss every year to oil theft, illegal refining, and pipeline vandalism.

The head of the research team from the University of Port Harcourt (UNIPORT), Ogoni-born professor of History, Ben Naanen, said 200,000 barrels of crude oil or 14 per cent is stolen every day out of the 1.4 mbpd produced in Nigeria. He however admitted that other sources in recent times have put it at 30 per cent or some 470,000 bpd.

At the price of over $100 per barrels with one dollar exchanged at about N411 in the official market, the loss is between N8.2Bn and N17bn per day, making it between N30 trillion and N60 trillion loss per year.

The professor said the financial loss was nothing compared with huge damage to the environment and ecology of the oil region let alone human tragedies and disaster including roasting of hundreds of citizens every often from blow out and explosions at fire disasters at bust pipe sites such as the almost 200 persons that were believed to have been roasted last week at Egbema between Rivers and Imo states.

Why SPDC commissioned the study

The head of Shell’s Ogoni Restoration Project (ORP), Vincent Nwabueze, who admitted that SPDC supported the research study to look at vandalism and oil theft, said tidal waves along the Niger Delta coastal areas wash the pollution along the coast, thereby spreading the pollution and poisoning aquatic life along.

He said: “We are looking beyond Nigeria in the size of pollution. Oil theft goes beyond Nigeria up to Russia, China, Japan, Mexico, etc, but governments of those countries are doing much to contain it. In Nigeria, people are now asking questions because awareness is increasing.

“Industrialization will not happen without partnership between oil companies and universities.”

He mentioned some challenges encountered in the remediation project going on in Bodo in Ogoni and said it was difficult to get undisturbed soil for testing because what they have is sediments. “We will review the Naanen Report, critique it, and refine it to come up with a working document.”

The shocking findings of Ben Naanen

The professor told the enlightened audience that with about 14 per cent of Nigeria’s crude oil production being stolen, the country’s petroleum-dependent economy faced a clear and present danger. “About 30 percent of the stolen crude goes into artisanal refining mainly for the local market while the balance is exported.

Consequently, diminishing investment in the oil sector, divestment by oil majors, the country’s inability to meet OPEC quota, make Nigeria unable to benefit optimally from current record high global oil prices to strengthen the economy.”

He said oil theft is more widespread globally than it appears , but that Nigeria’s level of industrial scale theft puts the country in a class of its own. “Initiatives to combat oil theft in Nigeria have so far yielded little impact largely because of the inadequate capacity and compromise of the agencies entrusted with that responsibility, the deep involvement of the elite, and failure of the judicial system to speedily prosecute suspects”.

The study which looked at some local council areas of Rivers, Bayelsa and Delta states drew lessons from other countries similarly grappling with oil theft.

The researcher admitted that crude oil has been a curse and from corruption to outright theft. “Oil and Gas production comes with corruption, unemployment, under-development, the emergence of petrocracy. Oil robbery and artisanal refining, huge revenue loss & potential economic crisis, environmental destruction, severe health effects, and armed conflict are some of the curses. There are also huge revenue loss by the government and socio-economic and environmental impact on Niger Delta communities”.

Naanen surveyed Mexico, Colombia, Brazil, Russia, Singapore, and Canada as well as industry players such as NNPC, Shell, Agip, government regulators such as DPR, NOSDRA, Security: JTF, and involved oil companies officials, security personnel, local government officials, civil society organizations and academics, community leaders and youth participants.

The research found some triggers such as resource control conflicts and militancy in the Niger Delta, rediscovery of artisanal refining, rising world prices of oil and international demand for cheap oil, and discovery of relatively safe pipeline tapping techniques (hot and cold tapping)

Remedies

Some of the remedies proffered include judicial processes such as criminalization because all the countries cited in this study apply criminalization and prosecution of offenders with varying jail terms. There is an asset seizure which Mexico adopted and a regulatory Intervention whereby Mexico uses the cancellation of operational licenses of complicit businesses.

The socio-economic measures include initiatives to the development of oil/resource regions. “Mexico development funding is in 91 municipalities in pipeline areas where theft is rampant as a replacement for the lost employment and fuel subsidy in those communities when oil theft is eliminated.”

Mexico has launched aggressive solutions such as the deployment of 8000 soldiers; Colombia deployed troops during the FARC insurgency; Russia deployed security forces. Technology also helps. All the countries adopt pipeline protection technology with varying sophistication and success.

Recommendations:

Naanen suggested Nigeria should act like Mexico by launching a military clampdown by escalating the military force to protect oil and gas infrastructure by shutting down pipelines on which theft is rampant. He however wondered if Nigeria can afford to shut down crude export lines.

He also suggested freezing the bank account of businesses trafficking in stolen oil; cancelling the licenses of service stations trafficking in stolen oil; investigating and firing of oil industry workers aiding oil theft and pipeline attacks; inauguration of special courts to speedily and diligently prosecute suspects; adoption of ultra-sensitive real time pipeline intrusion technology, especially IoT, accompanied by rapid deployment force.

He also suggested som socio=economic measures especially constitutional review of 13 per cent to make its utilization effective and accountable, and urged to review their surveillance system, including deployment of highly sensitive real time pipeline intrusion technology.

Read also: Nigeria loses over N60trn annually to oil theft, illegal refining- report

Challenges of suggestions

The research team also listed some of the challenges that may not allow the suggestions to work in Nigeria such as llack of political will to implement the necessary decisive measures; political cost of implementing those measures; military under-capacity and compromise; deep involvement of the elite; oil theft deeply integrated into the socio-economic culture and business model of Niger Delta communities e,g, pipes for distribution of stolen oil to communities, community ownership of tapping points, payment of matching ground to the youth groups by oil thieves and illegal refiners. “Bunkering is much more lucrative and less challenging than most local opportunities. It is one of the quickest sources of enrichment in Nigeria.”

Way forward: Regularisation, the new debate?

In the face of the challenges, the team suggested new thinking and paradigm shift such as mitigation because as he put it, elimination is virtually impossible.

Putting forward regularization as the new angle to look at, Naanen pointed at some potential benefits of regularization such as complementing official imported fuel supplies to mitigate scarcity and unaffordable prices; enhancing government revenues by taxing the regularised operators; significant employment opportunities; and enhancement of local capacity in refining.

Conclusion: Takeaways

Saying the onus is on the government to tackle illegal refining menace that comes with soot, pollution, fire disasters with mass deaths, etc, Naanen said the take-away from research presentation on combating illegal refining and environmental disasters in the Niger Delta is that no other option has succeeded.

“Government can control or regulate the refining process and also boost revenue. It is important to begin to weigh the possibility of regularization. What is required is to debate on the modalities for regularizing illegal refineries such as how they should obtain the crude oil, some processes they must adopt for safety of the operators and the environment.’

He said it is important to admit right away that modular refineries will not solve the problem. It is not sustainable. “The only one so far being experimented is costing the FG through the Nigerian Content Development and Monitoring Board (NCDMB) $10m as 30 per cent equity. And this will only yield diesel, leaving out petroleum and kerosene that are in higher demand.

“Some benefits are hanging on it such as tax to the government, jobs for the boys, product availability, and safer operating processes.”
He urged the FG and other experts to work out how the boys can acquire crude oil which at present they either steal or buy from thieves.

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