By Ovie Okpare
The Abaezi forest disaster where over 100 persons were roasted to death at an illegal crude oil refining site in Ohaji-Egbema Local Government Area of Imo State and the recent can of worms opened on state agents accused of owning and operating illegal refineries in Rivers State are clear examples of the illegal oil deals in the Niger Delta region.
Just like the Egbema incident, the first major disaster resulting from crude oil theft in Nigeria happened in 1998 at Jesse Town, the traditional headquarters of Idjerhe Kingdom in Delta State. No fewer than 1,000 persons were burnt to death while scooping petroleum products in that tragedy.
The 1998 Jesse experience remains the deadliest pipeline explosion to have occurred in Nigeria until now.
Though oil theft is as old as crude oil exploration activities in Nigeria, illegal bunkering became one of the most lucrative businesses in the region after armed youths were pressurised to down tools to accept the Presidential Amnesty Program of President Umaru Musa Yar’Adua (now late) in 2009.
Since then, Nigeria has been on the walk to bankruptcy owing to the amount of crude oil stolen daily from the Federal Government of Nigeria. Also, international oil cartels in collaboration with local gangs equally milk the country dry by siphoning crude through illegal means outside shores of Nigeria with massive ships.
From Delta to Bayelsa, Rivers to Imo, Akwa Ibom to Cross River, Edo to Ondo and Abia, there are recorded cases of illegal refinery sites and points where the nation’s crude oil is stolen by “unknown oil thieves”.
What’s an Illegal Refinery?
Illegal refining is also known as illegal oil bunkering or “kpofire”. It involves oil thieves who break in and syphon crude from pipelines. They then transport it in large wooden boats and ships to artisans who buy the stolen crude, refine it by crude methods into various products, mostly kerosene and diesel.
The illegal business has remained viable because of black market distributors who purchase from the illegal refiners. These release the products to wholesalers. From them, retailers buy and sell to end users. According to statistics, about 40 per cent of consumed petroleum products currently in the country emanate from the activities of these refiners.
Hardly anyone in the operating environments can claim ignorance of this evil business that produces soot which contaminates the air, destroys rivers and aquatic life, pollutes land and vegetation, and disrupts livelihoods.
More disturbing is the fact that Nigeria has consistently failed to meet the Organisation of Petroleum Exporting Countries’ (OPEC’s) production quota. Across the oil and gas operating maritime space, land and waterways, a multiplicity of anti-oil theft and illegal refineries security tactical commands parade the landscape on humongous funding that takes a severe toll on the nation’s economy.
Over the years, the Nigerian Government is recorded to have been spending whopping sums running into hundreds of billions of naira to maintain various security formations set up to prevent stealing of this common resource. Yet, the volume of theft has grown in leaps and bounds. This development, in some instances, had compelled operators to declare a force majeure.
From the Joint Task Force (JTF), to the Nigeria Navy, the Nigerian Security and Civil Defense Corps (NSCDC) and the Police in various shades, security operatives are everywhere in the area. Regardless of this, crude oil theft has continued unabated.
A Nation Bleeds From A Booming Economic Sabotage
Recent figures released by the Nigerian National Petroleum Company Ltd (NNPC) reveal that crude oil production has dropped to an all-time low of 1.29 million barrels per day (without condensate). The addition of condensate brings Nigeria’s current production to 1.49 mbpd. All thanks to the activities of oil theft.
Every Nigerian should be worried when you pin these figures against Nigeria’s ₦39.556 trillion sovereign debt. This indicates that Nigeria is living on a ventilator. It further buttresses the position of renowned economists that in the months ahead, governments may not be able to pay salaries and carry out their statutory duties. Calamity is already staring us in the face. Something urgent needs to be done about it.
The oil sector provides for 95% of Nigeria’s foreign exchange earnings and 80% of its budgetary revenues. Without revenues from the oil sector, Nigeria will crumble. Currently, the non-oil sector (not inclusive of taxes from oil sector) can’t drive and sustain Project Nigeria.
Figures obtained by NIGER DELTA TODAY revealed that the Trans-Forcados Pipeline alone records about 19,000 bpd loss daily to theft. The pipeline is about the most reliable of all the land lines in the region.
In terms of the financial loss to the nation, in 2021 the total volume of crude oil stolen was estimated at 200,000 barrels per day. At an average price of $55 per barrel, from January to December 2021, Nigeria recorded a total loss $4.015 billion (four billion and fifteen million dollars) to theft.
Just two months into the second quarter of 2022, between January and April alone, the volume of crude oil stolen has risen to about 250,000 barrels per day. This puts the total loss at about $1.5 billion (at the rate of $100 per barrel).
Shocked by the latest development in the country’s oil sector, the GMD/CEO of NNPC, Mallam Mele Kyari, described the situation as a national emergency. This is because of the proportion, dimension, and sophistication oil theft has assumed in recent times.
According to him, “Nigeria, as an oil producing country, ought to 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. Before the Russia-Ukraine crisis, crude was selling between $96 and $97 per barrel. It shot up to $105 per barrel the following day after the conflict began. It has since then been hovering between $110 and $125 per barrel since then. Nigeria is not reaping as much as it should from this because it is not able to meet its OPEC production quota.”
Kyari, lamenting the situation at a recent event, said “It got to a point where, if you inject 239,000 barrels of crude oil into either of the Trans-Niger Pipeline or the Nembe Creek Trunk Line (these are some of the major pipelines that convey crude oil to the terminals for export), you will only receive 3,000 barrels.
“It got to a point where it was no longer economically sustainable to pump crude into the lines and a force majeure was declared.”
The GMD recalled that “2020 was the year Covid-19 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 2.49 mbpd on 17th April, 2020.
“What that development showed was that Nigeria has the capacity to produce that figure (2.49 mbpd) on any normal day because there was no special intervention of any kind that led to that peak production on that day.
“However, as normalcy began to return and the price of oil began to experience 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.”
Painfully, crude oil production has dropped to an all-time low of 1.29 million barrels per day (without the condensate). The addition of the condensate brings Nigeria’s current production to 1.49 mbpd. This is a point where Nigerians should be worried about the progress and prosperity of the country.
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. The average production in 2020 was at 1.77 mbpd.
Kyari is not the only one having sleepless nights over the ugly happenings in the oil sector in the country. In fact, renowned banker and chairman of Transcorp Group, Tony Elumelu, raised a similar alarm that Nigeria could be heading for a collapse, and demanded to know those behind the illicit business.
Elumelu, operator of Oil Prospecting License (OPL) 281, collaborated the NNPC GMD’s position that with the level of oil theft, Nigeria might not meet its Organisation of Petroleum Exporting Countries (OPEC) production quota, since the bulk of the crude is usually stolen.
The Niger Delta-born entrepreneur vented his anger through his verified Twitter handle, saying “There is no doubt that Nigeria will not reach its OPEC production quota unless it stops the stealing. Who is stealing crude oil? They are not everyday people. They are the elite of society, and we must fight them together.”
The rate of oil theft kept increasing with as the price of crude oil was rising in the market until March 2022 when there was zero recovery from all the volumes pumped into the line.
Another noticeable pattern in the trend of oil theft is that it is more endemic with Joint Ventures assets and those that belong to the Independents than with Production Sharing Contracts assets. This is likely because of the nature of the JV assets which are mainly onshore or in swampy areas or shallow waters. This makes the evacuation pipelines more accessible than those of the PSCs which are offshore and in deep waters.
There is also a pattern in the way the theft is carried out. This can be discerned from the size of pipes inserted on the lines and the technology deployed in carrying out the insertion.
In some cases, the pipes inserted to steal crude oil from the lines are small and fitted in an amateurish way. This is an indication that those involved are small time criminals, more likely artisanal refiners who operate the slew of illegal refineries that dot the creeks of the Niger Delta from Akwa Ibom to Rivers, and from Delta to Bayelsa.
Some of the pipes fitted into the lines to siphon crude oil are big. In some cases, they are of the same size as the pipeline or of the size that is used at the terminal to pump crude into vessels. A closer look at them would reveal that they are professionally fitted with the use of cutting-edge technology. There have been cases where riser pipes were used indicating that the criminals deployed cranes. These cases indicate that the persons involved are not the regular illegal refinery operators but sophisticated and very knowledgeable criminals with access to vessels through which they ship the stolen crude oil out of the country.
The involvement of this last group is what accounts for the high volumes involved in the theft that has become an existential economic threat to the oil and gas industry and Nigeria as a nation.
On the other hand, artisanal refiners and their illegal refineries constitute a very grave danger to the environment and people of the host communities through the heavy pollution caused by their activities. This is beginning to cause soot in the atmosphere with the resultant health challenges in some of those communities.
Another way to look at the virulent nature of this crime is to assess the rate at which the crude pipelines are breached with insertions. On a stretch of 20 kilometers pipeline, 85 insertion points were discovered in three weeks! There are also cases of sheer vandalism where the lines were just blown out with explosives resulting in spillages and environmental hazards.
Another critical part where oil theft is affecting the economy is in the area of investments. It has slowed down the gains the Petroleum Industry Act (PIA) is supposed to bring about in the area of investments. Potential investors now ask how they can recoup their investment when crude oil is being stolen.
More than any other limitation is the collapse of the nation’s oil refineries. This has instigated oil theft and illegal refineries. Nigeria is the only major crude oil producer with the comparative advantage of the 7th producer without refining capacity.
Grossly inadequate as they were, if the existing refineries were working at installed capacity, petroleum products will not be as much sought after. This would have discouraged illegal refining. Also, petroleum products would have been far less in demand if electricity supply was steady.
The Port Harcourt Correspondent of the Vanguard Newspapers, Egufe Yafugborhi explained. “Imagine the volume of households and businesses who depend on power supply from generating sets fed by petroleum products, petrol o diesel.
If our power plants were giving steady supply, there will be less demand for fuel, imported or illegally refined in Nigeria. So, the oil theft is a shared blame for which the government and relevant agencies share a big part.”
Efforts To Tackle Oil Theft
The Nigerian Government allocates huge chunks of its budget for the protection of oil and gas facilities, particularly in the Niger Delta. Notwithstanding this, the menace has continued. It is in fact growing worse by the day. The development informed President Muhammadu Buahri, who doubles as the Minister of Petroleum Resources, to give marching orders to the Chief of Defense Staff to lead a war against the criminals
Following President Buhari’s orders, all the security agencies have been mobilized to flush out the criminal elements and restore normalcy. In this regard, the DSS and the Navy have already made some arrests.
NNPC has also deployed community-based security to monitor the pipelines. It is also working on deploying technological tools for more effective surveillance and monitoring of the lines and facilities.
In addition to these security measures, the Federal Government has also activated anti-corruption agencies including the EFCC and the NFIU to tracking the movement of funds relating to the criminality.
Are Niger Delta Governors Concerned?
For the Rivers State governor, Nyesom Wike, everybody is to blame. Receiving Chief of Air Staff, Air Marshall Isiaka Amao, at the Government House, Port Harcourt, recently, Wike said, “Bunkering cannot stop because everybody is involved. The military is involved, the police are involved, the NSCDC is involved. If not, there is no way illegal bunkering can continue.
“I don’t know whether we should take the issue of bunkering to be more serious than treason. If you go around and see what has happened to our environment, you’ll have pity on us.”
Wike, seemingly disturbed on the issue, on January 8, activated the needed political will when he tasked Rivers CP, Friday Eboka, and other relevant agencies to arrest and prosecute artisanal refinery operators.
In the timeline on the governor’s raging offensive, apparently intended to wake other key state actors from their slumber, Wike on Jan 9, declared 19 bunkering, illegal refineries kingpins wanted. He directed Rivers State Head of Service to query one Mr. Temple Amakiri, a Director in the Ministry of Energy, for allegedly abetting bunkering activities and that he be handed over to the police for investigation and possible prosecution. He announced that the task force raided some “kpofire” sites and arrested some suspects.
Furthermore, accompanied by senior security heads in Rivers, Wike toured the forests of Ogbodo community, Ikwerre LGA, and Ibaa, Emohua LGA, to uncover “kpofire” sites.
He directed the State Attorney General and Commissioner for Justice, Prof Zacchaeus Adangor, SAN, to take over the case files of illegal crude oil refinery operators arrested by the police for diligent prosecution.
Wike’s offensive against oil theft led to the redeployment of the DPO and NSCDC officer implicated in illegal refinery activities in the State.
In Delta, the State House of Assembly, April this year, passed the state forfeiture of property bill. This seeks to outlaw illegal dealings in crude oil and provides for the forfeiture of property used for storage of suspected stolen crude in the state.
The bill was an executive bill. It’s now awaiting the assent of Governor Ifeanyi Okowa. It is part of the renewed efforts by the Delta State Government to stamp out illegal oil dealings from the state.
Once signed into law, the bill would help check oil bunkering and ensure that those who use or provide their property for illegal bunkering were held liable.
After passage, the Speaker of the Assembly commended the lawmakers for their cooperation and speedy passage of the bills.
Hope Around The Corner
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. Stamping them out will ensure that the oil and gas industry can yield the fullness of its benefit to the nation and the citizenry.
