Crude oil theft has grown into a huge monster threatening the wellbeing of the Nigerian economy. And stakeholders are unanimous in their call that very aggressive measures must be taken, and urgently too, to find a lasting solution to the challenge.
The widespread hue and cry from both operators and regulators alike point to one fact. Oil theft and pipelines vandalism must be stopped otherwise the sector cannot move beyond the current level, rather, it will nosedive further.
According to Wood McKenzie, a global mining and consultancy research group, the oil theft challenge in the country has gone beyond a crisis point.
The group managing director/CEO of the Nigerian National Petroleum Company (NNPC) Limited, Mallam Mele Kyari, has described it as a national emergency on account of the proportion, dimension and sophistication it has taken in recent times.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) said Nigeria lost $3.2 billion in crude oil theft between January 2021 and February 2022. Even as operators, especially the Oil Producers Trade Section and the Independent Petroleum Producers Group (IPPG) are declaring force majeure as over 91 per cent of crude is being lost in some pipelines.
In 2020, the Nigerian Extractive Industry Transparency Initiative (NEITI) said Nigeria’s loss to crude oil theft stands at $4.19 billion yearly. Reportedly, Nigeria is losing over 300,000 barrels of crude oil per day to oil theft, vandalism and other related criminal vices in the country. The implications, according to reports released by NEITI include loss of revenue, environmental disaster, a threat to regional peace and security, the proliferation of arms and a poor investment climate.
With the situation going out of hand, businessman and entrepreneur, Tony Elumelu had recently said: “Businesses are suffering. How can we be losing over 95 per cent of oil production to thieves? Look at the Bonny Terminal which should be receiving over 200,000 barrels of crude oil daily, instead, it receives less than 3,000 barrels, leading the operator, Shell to declare force majeure, which has taken a toll on their businesses.
Nigeria, as an oil producing country, should be enjoying a windfall now with the sudden rise in the price of crude oil in the international market due to the Russia-Ukraine situation. Sadly this is not to be as massive thefts means the country has less crude to sell and thus, the economy bleeds financially.
Crude prices have risen to as high as $125 per barrel since the Russian-Ukraine crisis began. Despite this, earnings from crude oil sales have not benefited the economy and the nation at large as indicated by remittances to the federation account.
Nigeria is not reaping as much as it should from this because it is not able to meet its OPEC production quota.
Data provided by the NNPC shows that crude oil production has dropped to an all-time low of 1.29million barrels per day.
A look at production figures from 2020 till date shows in stark relief how much of a monster the menace of crude oil theft has become as average production in 2020 was at 1.77mbpd even when the ravaging COVID-19 pandemic almost brought the world to a halt with virtually every country on lockdown.
This saw the price of crude oil crashing to sub-zero levels with unprecedented demand dip. This development resulted in zero crude oil theft in Nigeria, obviously because there was no market for the thieves to sell their stolen crude. This saw the country recording its highest production level of 2.49mbpd on 17th April, 2020.
According to Mallam Kyari, what that development showed was that Nigeria has the capacity to produce 2.49mbpd on any normal day because there was no special intervention of any kind that led to that peak production on that day. But, as normalcy began to return and the price of oil was experiencing a steady rise, the oil thieves began to step up their game and upstream operators began to experience production losses which have been growing since in almost direct proportion to the rise in crude oil price in the international market.
Explaining further, Kyari said, the rate at which the crude pipelines are breached with insertions points to the virulent nature of these crimes. “On a stretch of 20kilometers pipeline, there were 85 insertion points in three weeks!” he lamented.
Commenting, stakeholders in the Nigerian oil industry advised the federal government to involve host communities in the protection of petroleum pipelines as such will help curb crude oil theft.
Executive director, Centre for Transparency Advocacy, Ms. Faith Nwadishi, Nigeria need to be proactive in the way the menace is handled.
“Luckily for us, we have the PIA that has been passed. There’s a component of the host community we need to as quickly as possible begin to implement the components from the host community. We need to reengage the community people on how to protect these pipelines in their neighborhood, because people have argued that the reason why the crude is stolen is because the people have not gotten anything out of it,” she said.
However, Nwadishi said that beyond the community people stealing crude there is connivance of the expertise of the professionals that know how this is done and the security agents. Accordingly the federal government needs to tighten security surveillance around the pipelines.
Also, Political Adviser on Security to the European Union Delegation in Nigeria, Thomas Kieler, stated that efforts in curbing the challenge of curbing oil theft in the Niger Delta could take the short, medium- and long-term dimensions. He described the short-term plan as “securing the region and defending pipelines,” with the medium-term plan being “law enforcement and identifying financers.” The most difficult yet beneficial is the long-term arrangement that involves the host communities in important decision-making and livelihood processes.
On what the federal government is doing to curb the menace, the NNPC explained that with the twin menace of oil theft and pipeline vandalism assuming epidemic proportion, the President has given marching orders to the Chief of Defense Staff to lead a war against the criminals
“All the security agencies have been mobilized to flush out the criminal element and restore normalcy. and the DSS and the Navy have already made some arrests,” the GMD had said.
The NNPC said it has also deployed community-based security to monitor the pipelines while it is working on deploying technological tools for more effective surveillance and monitoring of the lines and facilities, while the EFCC and NFIU are also tracking movement of funds relating to the criminality.
“While there is hope that all the measures that have been deployed so far will begin to yield results within the next two months, it must be pointed out that oil theft and pipeline vandalism are problems for everyone. Apart from the host communities that are directly affected by the environmental degradation, every citizen suffers the loss of national revenue when government does not have enough to provide social amenities and infrastructure to improve the quality of life in the country.
“It is therefore, imperative for all Nigerians to rise up against those behind crude oil theft and pipeline vandalism with a view to stamping them out so that the oil and gas industry can yield the fulness of its benefit to the nation and the citizenry,” Kyari stated.
