- Oil theft employs 500,000 in Niger Delta
By Jeph Ajobaju, Chief Copy Editor
Stealing Nigeria’s liquid gold persists despite claims by the Nigerian National Petroleum Corporation (NNPC) that it has fixed the latest pipeline rupture in Delta State from where, down further South, oil theft has replaced violent militancy.
Militants have not stopped oil operations since 2016 because they see stealing as safer and more lucrative than rising up in arms and losing their lives in the process.
Nigeria lost 22 million barrels of oil to theft between January and June this year, a threat to the economy, the NNPC disclosed.
This amounts to more than 120,000 barrels per day (bpd), or roughly 6 per cent of total output of about 2 million bpd.
Oil theft has become an industry on its own, employing about 500,000 people.
Nigeria aims to increase output to 4 million bpd and that may translate into more stolen crude.
Tackling oil theft requires a “holistic approach,” former Oil Minister Emmanuel Kachikwu said in May.
“Oil theft is rife because there is an economic gain to be made from it. So we want to shut those illegal gains by creating positive and legal economic opportunities,” he added.
NNPC Managing Director, Mele Kyari, admitted that the latest burst pipeline spilled oil but confirmed it was contained.
NNPC initially said the pipeline was carrying gas. However, Kyari explained on Twitter it was the Abura Crude Trunk line which transports oil.
He insisted that there was no pipeline explosion as reported by residents in Otu-Jeremi in Delta State, saying, “It was a rupture on one of our pipelines.”
The pipeline, near Oil Mining Licence 34, is owned by NNPC subsidiary Nigeria Petroleum Development Company (NPDC) and ND Western.
The licence produces an average of 17,000 bpd of oil and condensates and 390 million standard cubic feet of gas.
Gas processed from the field goes into the Escravos-Lagos Pipeline, which feeds Egbin power plant, the largest in Nigeria.
It is also near NPDC asset OML 65, which produces as much as 12,000 bpd of crude oil from the Abura field.
Targets for theft, sabotage
Nigeria depends on oil for 70 per cent of government revenue and 90 per cent of foreign exchange earnings.
But Reuters reports that the oil pipelines that snake through the swampy Niger Delta are targets for theft and sabotage.
Edo State Governor, Godwin Obaseki, who also chairs the ad-hoc Committee of the National Economic Council on Crude Oil Theft, Prevention and Control, warned that the 22 million barrels stolen could double by December 2109 unless combated.
The NNPC said there was a 77 per cent rise in oil pipeline vandalism in June, or 106 incidents compared with 60 in May.
Many of the breaches are points where thieves can siphon off oil and either sell it illegally or refine it in artisanal refineries often little more than drums boiling oil into rudimentary fuels, according to Reuters.
NNPC spokesman Ndu Ughamadu said the government is studying the problem, but did not specify actions being taken to combat it.
Losses can fund budget deficit
Saboteurs, including thieves, caused an 80 per cent increase in the number of spills in 2018, Royal Dutch Shell, the largest oil producer in Nigeria, said in a report in May this year.
The disruptions underscore how hard it will be for Nigeria to fully rid itself of security challenges that have plagued the nation for decades, Bloomberg reports.
Overseas crude shipments represented by far its largest source of export income, with about $43.6 billion of sales last year, according to ITC Trade Map, a venture between the World Trade Organsation (WTO) and the United Nations (UN).
“Oil theft is a severe drain on Nigeria’s revenue,” said Cheta Nwanze, the head of research at SBM Intelligence, a consultancy based in Lagos. “The losses to theft could easily fund Nigeria’s budget deficit.”
Theft lesser evil than militancy
On one level, theft is probably a more palatable option for Nigeria and oil companies than attacks by militants.
Bloomberg reports that, in its own findings, about 100,000 barrels a day are being taken out of pipelines, whereas militancy halted at least eight times that amount at one stage three years ago.
Ledum Mitee, a lawyer and minority rights activist, said the increase reflects a belief among local communities that multinationals do not really own the barrels in the first place.
“They believe the oil is theirs and the government is the thief. People now realise that instead of just cutting pipelines to spite the government, they can make money out of it,” he explained.
Oil theft employs 500,000
Stealing the liquid gold has grown into something like an industry.
Mitee, former head of the Nigeria Extractive Industries Transparency Initiative (NEITI), said oil theft employs at least 500,000 people in the Deep South.
Much of the stolen crude is processed in tiny, makeshift refineries comprising hundreds of cauldrons, each of which can hold as much as 150 barrels of oil, added Nwanze.
The world’s biggest refineries handle more than 1.2 million bpd.
Unlike politically-driven militancy, where fighters say they represent impoverished people in the Niger Delta, stealing crude is considered a less risky option for those involved.
Multiple incidents of force majeure, a legal measure that allows companies to forgo their contractual supply obligations, have happened this year in Nigeria – even if the precise causes often remain unclear.
Shell loses 11,000 barrels daily
Aiteo Group, operator of the Nembe Creek Trunk Line to Shell’s Bonny export terminal, has been one of the hardest hit this year, halting flows through the link at least three times between January and June.
And the challenges do not appear to be getting easier. Shell lost an average of 11,000 bpd to theft in 2018, the company said. An increase in losses of 9,000 bpd in 2017.
Chevron has also reported problems with third-party interference on its production facilities.
The rogue refineries – essentially scaled up versions of widespread gin distilleries in the region – typically employ about 100 people working in shifts.
Daily yields from one cauldron include 7,500 litres of diesel, 2,000 litres (petrol), and 500 litres (kerosene). It costs about N4 million to construct a boiling pot.
Oil producers often take their own security measures, deploying daily helicopter surveillance with infrared cameras while simultaneously pushing state authorities to do more.
Large-scale theft persists, nonetheless.
