Oil theft and pipeline vandalism are oil songs from an oil hymn book in the Niger Delta, where there has been persistent political and social unrest with new allegations pointing to how Nigeria’s military may be aiding this illegal trade.
A Joint Task Force (JTF) comprising personnel from the Nigerian Army, Air Force, Navy and Police have been deployed in the Niger Delta region since the early 2000s. The JTF is tasked with tackling the militant threat in the region and preventing oil theft. But there have been indications that some JTF members are complicit in the twin crimes and tend to benefit from the oil assets they are mandated to protect in order to eradicate the illicit oil industry.
“There are palpable allegations in this line and I think it is something the military headquarters should take seriously and investigate because it is an act of economic sabotage,” said Adeola Adenikinju, a professor and director of the Centre for Petroleum, Energy Economics and Law at the University of Ibadan.
Cost of Nigeria’s leaking pipeline
In the month of May alone, Nigeria lost a total $101.3 million due to shut-in of production from leaking pipelines carrying crude oil from wells to flow stations in the Niger Delta, where more than 90 percent of the country’s crude is explored.
The loss comes from 1.5 million barrels of crude oil that the Nigerian National Petroleum Corporation (NNPC) said in its May monthly report that it could not take to the market due to shut-in pipelines.
Combined production shut-in from all the six terminals which include Forcados, Bongo, Bonny, Brass, Egina, Oyo, and Amenam in May was 1.5 million barrels worth, with a total value of US$101.3 million, using the average price of the international Brent crude, the benchmark for Nigeria’s crude oil which sold for an average price of $66.83 in May.
The NNPC admitted that payments into the Federation Account were affected after adjusting crude and product losses and pipeline repairs and management cost incurred during the period.
The state-controlled oil company’s pipelines suffered a total of 2,014 vandalised points in the 12 months between May 2018 and May 2019, fuelled mainly by crude oil theft and vandalism, with the corporation admitting that this incessant vandalism has put it at a disadvantaged competitive position. The corporation said it spent N12.4 billion for pipeline repairs and management in February alone.
The role of the armed forces
According to sources, members of the Nigerian armed forces have enabled and benefitted from the illegal trade in a number of ways. Often, this benefit comes from providing “protection” either from ensuring military officials turn a blind eye to the illegal activity or protecting oil thieves’ access to extraction points from rivals – in exchange for financial bribes.
A Chatham House report has suggested that JTF officers have stood guard at illegal tap points and provided armed escorts to ships loaded with stolen crude. Similarly, a 2015 report from the Stakeholder Democracy Network (SDN) said JTF members are actively involved in oil theft, from providing security to local oil thieves as they install taps that divert oil from pipelines to collecting “transportation taxes” for vehicles transporting oil and demanding “regional security payments” from illegal oil refineries for on-going protection.
SDN’s community interviews suggest that military involvement in oil theft approaches the systematic, with high-ranking officers reportedly overseeing the deployment of units to protect illegal refineries and key information is passed on as units rotate in and out.
“JTF and pipeline vandals are working hand in hand…They have the boys’ phone numbers and feed them with useful information. Even when their commander is transferred, they leave the phone numbers of the boys in their file for the new commander,” world’s leading non-governmental anti-corruption organisation Transparency International said in its 2019 report.
An investigation by an Abuja-based media firm reported conversations among workers involved in oil theft discussing the bribes they pay to military personnel to turn a blind eye to their activities.
In October 2018, the Navy was forced to deny allegations that personnel collected huge bribes from oil bunkers in exchange for allowing them to operate freely in Bille coastal communities in Rivers State.
Given the extent of the illegal activities and the potential complicity of a key state institution meant to be curbing these very activities, Civil Society Legislative Advocacy Centre (CISLAC) and Transparency International researchers have attempted to gauge the scale and depth of military involvement in oil theft with the hope of informing the policy debate and empowering agents of change aiming to reform the oil industry in the Niger Delta.
Six independent researchers conducted interviews and focus group discussions in the Niger Delta between February and July 2018 focusing on local communities including those who were familiar with illegal activities and who had witnessed oil theft in the region such as Nembe and Yenagoa in Bayelsa State, in Calabar in Cross River State, and in Port Harcourt in Rivers State.
Operators of artisanal refineries told (CISLAC) and Transparency International researchers that the JTF knew exactly where the bush refineries were located and how they are operated, and used that knowledge to extract payments.
“The JTF knows where every single cooking pot in the Niger Delta is, they know how to get there, and they know who owns it and they even have their phone numbers,” the researchers said.
According to the researchers, interviewees in Bayelsa State, for example, reported that after an illegal refinery failed to meet a deadline to pay an “operational fee” of N4 million, military officers arrived on the site and opened fire, allegedly killing one person and demanding an extra N200,000 for the delay. The next day, N1.7 million was delivered to military personnel with a promise to pay the balance of N2.30 million later.
Three months ago, Governor Nyesom Wike of Rivers State accused an army general of running an illegal oil bunkering squad in the state.
Governor Wike berated the General Officer Commanding (GOC) the 6 Division of the Nigerian Army, Major General Jamil Sarham, for raising a team of soldiers to steal and sell petroleum products in the region.
Impact on local and international oil producers
Both international and local oil companies operating in Nigeria have complained repeatedly in recent years about the growing and brazen nature of oil theft. Damage to pipelines by thieves cause spillages and can prevent the pumping of crude.
Indigenous local player Aiteo announced three months ago that leaks caused a shutdown of the Nembe Creek Trunkline, one of the two major pipelines exporting Bonny light crude oil, less than a day after the pipeline had reopened.
Data from Nigeria Extractive Industries Transparency Initiative (NEITI) show crude oil theft and sabotage rose from 27 million barrels in 2015 to 101 million barrels in 2016, an increase of 274 percent. This was aside from the losses due to deferment, which in 2016 were put at 144 million barrels, which also went up by 65 percent when compared to the 87.5 million barrels in 2015.
“Companies injecting into the Forcados Terminal such as Seplat, Panocean, Midwestern, Energia, Platform, Pillar, Waltersmith, and Excel shut down production for over 147 days,” NEITI said.
In addition, SPDC declared force majeure on the Bonny Terminal due to a leak in Nembe Creek Pipeline between May and July 2016 while Nigeria Agip Oil Company declared force majeure on the Brass Terminal between July and August 2016.
Similarly, Mobil Producing Nigeria Unlimited declared force majeure twice between May/June and July/October 2016. This was due to a drilling process disruption and damage to the Qua Iboe Terminal loading system.
Implication for Nigeria economy
Adenikinju, who is also a member of the Monetary Policy Committee of the Central Bank of Nigeria (CBN), said “illegal bunkering impacts our export volumes as Nigeria gets over 90 percent of its foreign exchange from crude oil exports”.
Bolaji Ogundare, who runs an indigenous oil and gas company NewCross Exploration and Production Limited with operations in the Niger Delta region, said every day there is always an oil company facing an incident of oil theft or bunkering.
“With bunkering comes spillage; this also leads to environmental clean-up, which automatically leads to a higher cost of production,” Ogundare told BusinessDay.
One major factor affecting Nigeria’s cost of producing oil in the Niger Delta, said Luqman Agboola, head of energy and Infrastructure at Sofidam Capital, is the security condition which naturally increases the cost of producing a barrel by nothing less than $5.
“If we become very efficient, Nigeria should be having an oil cost production of between $12 and $15,” Agboola said.
Rotimi Amaechi, minister of transportation, said Nigeria is currently losing $25 billion annually to illegal oil bunkering and insecurity on the nation’s high seas.
“The $25 billion illegal economy in the Nigerian deep waters was as a result of illicit oil bunkering,” Amaechi said at a reception organised by Team Maritime Nigeria to celebrate his achievements in the maritime sector during his first coming as transportation minister.
STEPHEN ONYEKWELU & DIPO OLADEHINDE
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