By Jeph Ajobaju, Chief Copy Editor
Destruction of oil facilities in Nigeria are rare these days as Niger Delta militants have resorted to refining crude stolen from pipelines to make money instead of risking their lives by blowing up facilities.
It is a cottage industry that employs over 500,000 youths in the Deep South, where all is now quiet except for occasional shout-outs by some of the 65 ethnic nationalities there for Nigeria’s restructuring.
Crude oil theft amount to 200,000 barrels per day (bpd), says the Nigerian National Petroleum Corporation (NNPC), and is concerned about the impact on the economy of petroleum products smuggling and crude oil theft.
The NNPC is seeking to help stop the crime, in collaborating with the Economic and Financial Crimes Commission (EFCC), Department of State Services (DSS), Nigeria Police Force (NPF), Nigeria Customs Service (NCS), Nigeria Security and Civil Defence Corps (NSCDC), and oil industry stakeholders.
NNPC Group Managing Director, Mele Kyari, told a stakeholders’ meeting in Abuja that President Muhammadu Buhari has mandated the Ministry of Petroleum Resources, the NNPC, EFCC, and other security agencies to stop oil theft and illicit truck-out of petroleum products.
Loss of benefit of subsidy
Kyari said oil smuggling and theft are major economic crimes that prevent Nigerians from enjoying the benefit of subsidised petroleum products.
He urged all industry players to collaborate with the NNPC to ensure that the 102 million litres of oil consumed daily is reduced to the realistic level of 60 million litres because the excess 42 million litres are smuggled to other countries each day.
His words: “We all agree that smuggling is not a business that should be condoned because even for deregulated petroleum products it brings extra cost burden on this country both in terms of safety and security of supply and in securing of foreign exchange.
“It even constitutes more burden to this country when the product involved is a regulated product like Premium Motor Spirit (PMS).”
With the increasing price of crude oil at the global market and the OPEC+ production cuts, he explained, Nigeria cannot afford to shoulder the cost of smuggling.
“We all know that our daily consumption is not up to 60 million litres. We all know that, and that is why we have to pull it down. We will pull it down by every means necessary.”
Kyari announced that the NNPC will emplace Advanced Cargo Declaration in line with global best practices to stop crude oil theft.
EFCC Chairman Abdulrasheed Bawa said the Commission will work with the NNPC to ensure that saboteurs are prosecuted and deterred.
Other who signed up to the initiative include the Major Marketers Association of Nigeria (MOMAN), Depot and Petroleum Products Marketers Association of Nigeria (DAPPMA), Independent Petroleum Marketers Association of Nigeria (IPMAN), Nigerian Association of Road Transport Owners (NARTO), and Petroleum Tanker Drivers (PTD)
Quantum leap in oil theft
The NNPC announced in February that Nigeria loses an average 200,000 bpd as a surge in pipeline sabotage led to a quantum leap compared to an average 70,000 bpd stolen as of August 2020.
“We have two sets of losses, one coming from our products and the other coming from crude oil. In terms of crude losses, it is still going on. On average, we are losing 200,000 b/d,” Kyari said in a statement.
Obsolete infrastructure
S&P Global recalled that in 2019, a report by oil industry auditor, the Nigeria Extractive Industries Transparency Initiative (NEITI), showed that Nigeria lost about 138,000 bpd of crude oil to theft over the past 10 years valued at $40.06 billion.
Producers have said costs continue to escalate due in part to attacks on facilities in the Niger Delta.
Foreign oil companies, including Shell, ExxonMobil, Chevron, and Total have linked their divestment in many onshore assets to oil theft.
Oil facilities face incessant sabotage attacks, others have aged, giving rise to frequent failures resulting in operational disruptions, high maintenance costs and revenue losses, according to S&P Global.
The NNPC has also blamed the erratic performance of its four refineries, with a combined nameplate capacity of 445,000 bpd, largely on pipeline outages which cut crude supplies.
It runs a network of over 5,000km of pipelines across the country that transport both crude produced by foreign partners and imported refined oil products.
Lowest output in four years
Nigeria has the capacity to produce around 2.2 million bpd of crude and condensate, but it pumped around 1.72 million bpd in 2020, according to S&P Global Platts estimates.
That is the lowest output since 2016 when Niger Delta militants repeatedly attacked key oil infrastructure pushing production to as low as between 1.4 million and 1.5 million bpd that year.
