Any solution to crude oil theft?

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A February 18, 2020 report by the Nigerian National Petroleum Corporation (NNPC) said the country lost another $750 million to oil theft in 2019.

Nigeria became the world’s oil theft capital last October following a report that approximately 400,000 barrels per day (bpd) was being stolen in the country.

Mexico, which came second, recorded only approximately 5000 to 10000 bpd loss to oil theft.

The report was the outcome of a study on oil theft carried out by the Nigeria Natural Resource Charter (NNRC).

Last Thursday, an advocacy group in the oil and gas industry, New Nigeria Foundation (NNF) broke down the figures even further in the latest edition of its Factsheet, ‘Unboxing crude oil theft in Nigeria’.

It said the about N15 trillion that Nigeria lost to crude oil theft between 2015 and 2018 amounted to  about 17 per cent of its four-year budget.

According to NNF, the amount lost could have bridged 28.7 per cent of Nigeria’s budget deficit during the period under review.

NNF Senior Programme Manager, Chikodi Chiedo, noted that crude oil theft is a multi-billion dollar enterprise with a lot of players at various level involved.

Why crude oil theft persists

Crude oil theft occurs for several reasons, including poverty, high unemployment and grievances about resource control, among others.

The NNRC study also identified several others. They include: Poor governance of oil revenue, corruption and a lopsided revenue structure, among others.

The report said: “Between 1999 2016, oil-producing states received N7.006 trillion as payment under derivation principle but delivered very little development.

“A 2005 World Bank report estimated 80 percent of Nigeria’s oil and gas revenues accrued to one percent of its population, 99 percent of the population received the remaining 20 percent.”

It said this led to the emergence of militant groups demanding resource control and development. Kidnappings, sabotage and illegal bunkering soon followed.

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Security contracts were then awarded to the militants to protect pipelines. This gave them direct access to the pipelines and opportunity to steal all again. Efforts to curtail this new trend were met with threats of further vandalism. Stakeholders found that it was cheaper to pay security fees than to repair.

Oil companies were not left out of the blame

The NNRC report accused oil firms of inadequate implementation of international best practices which led to deva stating environmental degradation. Damage to the environment caused health issue which in turn limited economic stimulus.

It added: “High youth unemployment resuming from the socioeconomic conditions in the region have led young men to become oil thieves. The average annual income of an artlsanal refinery worker is N3million.

“Low-level oil thieves who steal in small jerrycans claim to only partake in the activity because they need to feed their families. They normaly ‘scoop’ from leaking pines.

“Increasing levels of unemployment are matched by increasing levels of criminal activity in the Niger Delta.”

Effects of crude oil theft

Aside government’s loss of revenue, other effects of crude oil theft are easy to see. They include degradation of the environment, host communities’ loss of livelihoods, and destruction of life and property from pipeline explosions.

A 2019 United Nations report said devastating oil spills in the Niger Delta over the past five decades will cost $1billion to rectify and take up to 30 years to clean up.

Stopping crude oil theft

But stakeholders believe the problem is surmountable. NNF, for instance, identified several roles for the government, civil society and citizens in this regard.

Recommendations for government: Develop agricultural and manufacturing sectors to absorb unemployed youth. Provide social amenities (electricity, roads, hospitals, schools, water). Arrest and prosecute crude oil thieves, their sponsors and collaborators.

Recommendations for citizens: Sensitise youth to put collective interest above personal gains and crime. Participate in governance and hold government accountable. Advocate to government to support local refineries and establish modular refineries to meet local needs.

Recommendations for civil society: Hold pipeline surveillance contractors accountable for oil theft. Advocate for transparency and open data to the public from NNPC. Inform citizens about the bad effects of crude oil theft on their communities and environment.

Recommendations for oil companies: Improve internal content policy and ensure that most communities benefit from contracts and jobs

It also suggested that there should deployment of technology designed to swiftly detect, localise and cut off flows to specific pipelines as soon as leakages occur.

The group noted that crude oil theft is a multi-billion dollar enterprise with a lot of players at various levels and there is thus the need for collaboration among government agencies to prevent crude oil theft.

The group also lamented that inappropriate disposal of confiscated petroleum products by the Nigeria Security and Civil Defence Corps compounds the environmental impact associated with crude oil theft.

It called for better training, equipping and financing of the NSCDC operations to enable them handle such disposal.

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NNF noted further that the development of modular refineries and other technologies could help in meeting local market demands, eliminating illegal processing of crude oil and the attendant environmental damage.

CRUDE OIL FACTS

  1. Nigeria is the sixth largest oil producer in the world and largest in Africa.
  2. Oil is the mainstay of government’s revenue; it makes up about 90 per cent of exports and 70 per cent of foreign exchange receipts.
  3. 77 per cent of the 2018 national budget was derived from oil revenue. This implies that revenue from oil determines funding for development projects.
  4. Annual loss to crude oil theft is estimated at N995 Billion. (Oil Theft in Nigeria: A Report of the Nigeria Natural Resource Charter, 2018: Page 6)
  5. Nigeria lost 17,460,113 (net) barrels in 2018 to theft/sabotage. (DPR, 2019: Crude Oil Losses due to Theft/Sabotage (Net Barrels). About 25% of stolen crude is sold locally to artisanal refiners who “cook” the crude to produce petrol (2%); kerosene (2%) and diesel (41%). The remaining 55% is dumped into nearby water or shallow pits, resulting in environmental and health hazards.
  6. The impact of crude oil theft is enormous, translating to severe revenue shortages for the Federal Government; environmental degradation; loss of livelihoods; health challenges; loss of lives due to explosions at illegal refining sites; pupils drop out of school in order to join the lucrative oil theft enterprise; proliferation of arms, violence, etc.
  7. Efforts by different stakeholders to address crude oil theft including military interventions (JTF), pipeline surveillance, etc. have not yielded any positive result.
  8. Crude oil theft is a multi-million-dollar enterprise with a value chain that includes criminals, institutions, security personnel, communities, etc. As a result, it does not respond to one line of solution.
  9. Crude oil theft inhibits access to basic infrastructure. The combined capital expenditure of N831billion on health, education, transport infrastructure, power, works and housing in 2017 is 15 percent lower than the estimated average yearly loss to crude oil theft. (NNF, 2020: infographics on Crude Oil Theft).
  10. Solutions need to be multifaceted and integrated institutional mandate, regulatory capacity, improvement of artisanal refinery technology community participation, joint framing by states, etc.
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