Crude theft persists despite multi-million-dollar surveillance contracts

Despite multi-million dollar pipeline surveillance contracts the Nigerian National Petroleum Corporation (NNPC) awarded to private security companies for the protection of major pipelines across the country, Africa’s biggest oil-producing country is yet to get a grip on oil thieves who brought its oil industry to its knees a few years ago.

These pipeline surveillance contracts are awarded with surveillance contractors ostensibly tasked with monitoring sections of oil pipelines, identifying any breaks and protecting them from vandalism.

One of such contracts is the popular contract between NNPC and Ocean Marine Solutions (OMS) for the protection of the strategic 87-kilometre Trans Forcados Pipeline (TFP) valued at about $18.4 million which sparked huge controversy last year.

Some stakeholders claim there are subsisting N9.3 billion pipeline security contracts that the NNPC has with various companies.

In justifying these awards, Ndu Ughamadu, NNPC’s group general manager, public affairs division, claimed the corporation lost over 11 million barrels of crude oil, which on face value equates over $800m in lost revenue, due to incessant breaches on the TFP in 2018.

But despite these contracts, oil facilities in Nigeria still frequently come under attack from militant groups ranging from small-scale pilfering to industrial-scale theft.

Godwin Obaseki, Edo State governor and chairman of the ad-hoc committee of the National Economic Council on Crude Oil Theft, Prevention and Control, earlier in September disclosed that 22 million barrels of crude was stolen in the first half of 2019.

In July alone, NNPC said Nigeria lost a total of 1.2 million barrels to a combination of crude oil theft, pipeline vandalism and other petroleum wreckages while oil and gas pipeline vandalism rose by 77 percent in June this year with as much as 106 pipeline points breached as against the 60 points vandalised the preceding month.

Also, the country’s biggest onshore operator, Shell, which has a network of approximately 4,000 kilometres of oil and gas pipelines and flow lines, said crude oil theft experienced on its pipeline network resulted in a loss of around 11,000 barrels of oil a day in 2018, which was more than approximately 9,000 barrels a day in 2017.

Another cause of worry for stakeholders is that like most of NNPC’s operations, the award of these surveillance contracts has also been an opaque affair. The details of pipeline surveillance contracts are rarely made public, purportedly for security reasons, with government officials frequently citing such concerns to justify withholding information about schemes involving security sector corruption.

Also, the security-related nature of these contracts exempts them from competition, transparency, and oversight provisions within the Public Procurement Act of 2007, making them even more prone to corruption and political manipulation than other government contracts.

“Pipeline surveillance contracts function as a palliative for reduced, diverted or discontinued Presidential Amnesty Programme (PAP) payments because when such contracts end, ex-militants feel at liberty to engage in pipeline sabotage and related criminal activities once again,” Charles Akinbobola, an energy research analyst at Sofidam Capital, said.

A research report by Stakeholders Democracy Network (SDN), a nongovernmental organisation established to support those affected by activities in the extractive sector and weak governance, described the concept of pipeline surveillance contracts in the Niger Delta as a misnomer.

SDN noted that contractors were rarely involved in any actual surveillance; instead, the NNPC uses these contracts as disguised “payment for peace” to agitating groups, and as patronage to political allies.

“Pipeline surveillance contracts have similar short-term effects as amnesty programme payments to ex-agitators. They are not sustainable, especially as they are not part of a more holistic security and development plan,” said the report titled ‘Pipeline Surveillance Contracts in the Niger Delta’.

The SDN report noted that the value of security contract does not relate to the surveillance costs or replacement value of that infrastructure, or some other quantitative measure.

“Instead, contract amounts vary depending on how many ‘boys’ the company’s ex-militant operators claim to have under their command, and thus need to financially appease,” it said.

Another factor acknowledged by the report is the political influence enjoyed by those who control a pipeline surveillance company.

“Both the All Progressives Congress (APC) and People’s Democratic Party (PDP) use state- and corporate-sponsored pipeline surveillance contracts as a form of political patronage,” it said.

The SDN report recommended that government agencies should transparently budget for, and announce the award of, pipeline surveillance and waterways security contracts.

“Only bodies/institutions with an infrastructure security mandate should be able to award and terminate contracts and the Bureau of Public Procurement (BPE) should be involved to ensure maximum competitiveness,” the report said.

Other stakeholders in the Niger Delta have recommended that pipeline surveillance contracts be directly awarded to host communities rather than individual businessmen, including ex-militant commanders.

In the wake of the controversy over the contract award last year, OMS had in an advertorial, which it also copied to President Muhammadu Buhari, security agencies, Economic Financial Crime Commission (EFCC) and other critical stakeholders, urged the Federal Government to probe mismanagement of TFP while also alleging that those charged with TFP surveillance were afraid the company’s operation would put an end to their illegal racketeering in the petroleum industry.

The TFP is a vital piece of Nigeria’s national infrastructure capable of transporting 200,000 to 240,000 barrels of oil per day equivalent to 14 percent of Nigeria’s daily production. It is the key to transporting crude oil from some of Nigeria’s largest and most prolific assets and it is, therefore, of fundamental national strategic importance.

DIPO OLADEHINDE