Last February, the Nigerian National Petroleum Corporation, NNPC stated that oil theft had reduced substantially in the nation. UDEME AKPAN, however, reports that such activity has increased again, thereby impacting negatively on the nation’s economy.
Many keen watchers of developments in the Nigeria’s oil and gas industry were pleased when it was revealed that oil theft had reduced from 180,000 barrels per day, bpd to 80,000 bpd. The Group Executive Director, GED, Nigerian National Petroleum Corporation, NNPC in charge of Exploration and Production, Engr. Abiye Membere, who made this public in Abuja last February, attributed the development to the introduction of amnesty programme targeted at positive engagement and empowerment of former militants and improved monitoring of oil installations.
The situation was even expected to witness continuous improvement as Membere added that plans were under way to launch a major campaign to be tagged “Blood money“ before the end of 2013. The campaign, targeted at the major markets of stolen oil is meant to discourage those who patronize the trade from doing so because serious negative implications to Nigeria.
The GED said the major campaign being packaged by NNPC would involve key officials moving from one major buyers of the nation’s crude to another in West Africa and other parts of the world. As he puts it, “If we are able to discourage buyers from buying stolen crude and even the petroleum products that are processed from it, it would go a long way to tackling oil theft in the nation.
Contrary to such expectation, the situation seemed to have worsened in the past few months as the nation continue to record many cases of vandalism and oil theft in the nation. The volumes associated to the incidents are not small. In fact, the nation is said to have so far lost over $100 million (about N15.6 billion) as a result of illegal crude oil theft in 2013 alone.
The Managing Director Energia Limited, Mr. Felix Amieyeofor gave the estimate at the opening of this year’s pre-annual conference of the Nigerian Association of Petroleum Explorationists, NAPE in Lagos yesterday. He said that one of the major challenges confronting marginal field operators was crude oil bunkering and pipelines vandalism. According to him, “export line continuous vandalism has been a major challenge, for every barrel of crude pump through the lines about 25 per cent to 30 per cent is lost before it gets to the terminal.
“We are still working with the Department of Petroleum Resources (DPR) on ways to find lasting solution to the menace. If we pump 3,500 barrels of crude oil and about 30 per cent is lost in the process through oil theft, it is a great loss to marginal field operators.
Amieyeofor said that the company lost over $72 million (N11.2 billion) in 2012 to crude oil theft while $100 million (N15.6 billion) was also lost in 2013. He said that the cluster group which comprises of Energia Ltd., Midwestern/Suntrust, Platform Petroleum and Frontier Company with production capacity of about 8,000 barrels of crude oil per day would soon increase its production capacity to about 45,000 barrels in 2014 when additional wells are added.
He said that the additional fields are located in the so-called “marginal field cluster” in Nigeria’s volatile Delta State. Amieyeofor said that access to funding, community issues and security and low productivity among others posed serious challenge to all marginal field operators.
It should be noted that it is not only the indigenous firms that are affected. Oil theft is the disease that haunts both the locals and multinationals. For instance, the nation’s oil output has dropped by about 140,000 bpd in March; this year as a result of the shutdown of Nembe Creek trunk line in Bayelsa State that delivers crude oil from Shell’s producing fields to Bonny export terminal.
Shell Petroleum Development Company, SPDC, which accounts for half of Nigeria’ oil production, said in a statement yesterday that it had declared force majeure on Bonny Light export programme. The force majeure is meant to protect Shell from bearing any liabilities to crude oil buyers due to the shutdown. The company explained that the closure became necessary after a leakage was noticed on the pipeline.
Shell’s spokesman, Mr. Precious Okobolo, who signed the statement, said that SPDC was mobilising a team to repair the line after the investigation. “The cause will be determined by a Joint Investigation Visit, which will be scheduled once the leak point has been excavated. “There has been a recent upsurge in crude theft activities on the NCTL, resulting in frequent production shutdowns and massive oil spills blighting the environment,” the statement added. Okobolo also stated that between February 22 and 25, flow stations producing into the pipeline were shut down by safety systems three times due to oil theft.
The firm also stated it its report that, “It’s also impossible to know how much of the stolen oil is spilled once it is taken from our facilities. But we can estimate that 26, 000 barrels of oil were spilled in the area immediately surrounding our pipelines and other facilities in 2012, of which around 95 per cent was the result of sabotage and oil theft.
The report said stemming and reversing this menace requires coordinated action, both at the national and local level and at a regional and international level outside the country. It said the nation needs to do more to encourage investment in the power sector to ensure reliable electricity supplies to reduce demand for illegally refined local diesel. The report stated that the Niger Delta continues to be a challenging place to operate for many reasons, adding that there is a fundamental lack of basic infrastructure in many areas, with poverty, lack of employment opportunities, widespread criminality and other factors all contributing to the social and economic crisis in the region.
Shell cautioned that the theft of crude oil from its Nembe trunk line could threaten daily exports of 140,000 barrels of crude oil. The SPDC Corporate Media Relations Manager, Mr. Tony Okonedo, said in a statement in Port Harcourt that the theft was coming barely 16 months after the old trunk line was replaced due to repeated attacks.
However, the cost could be higher when its negative impact on the environment is also considered. In fact, the Federal Government has put the environmental cost of oil theft and illegal bunkering in the Niger Delta at $1trn (N156 trn). The estimate included the direct impact on the environment and the cost of restoring aquatic life destroyed as a result oil spills arising from oil theft and illegal bunkering in the region.
The Special Adviser to the President on the Niger Delta, Mr. Kingsley Kuku, gave the estimate at a conference on oil theft and illegal bunkering in Lagos yesterday just as the Coordinating Minister for the Economy and Minister of Finance, Dr Ngozi Okonjo-Iweala, said that the Federal Government will recover over N232 billion overpayments made to “fraudulent” oil marketers.
Kuku said: “While several estimates have been made regarding the cost of the national economy in revenue and pipeline repair, no one has calculated the cost to the environment and the livelihood of the people of the Niger Delta. No one has calculated the cost of restoring the environment; but extrapolating from the cost of restoring aquatic life in the Gulf of Mexico following the BP Gulf Coast spill of 2010, the cost to the Niger Delta will amount to more than $1trn.
Kuku noted that the illegal activities had already undermined the nation’s social structures and if allowed to fester, will turn the entire Niger Delta region into ganglands. He said that already, people in the chain of oil theft were feared, revered or even admired as people who are doing well in some communities, and those at the top of the chain are probably considered as prominent international oil traders by an unsuspecting public.
He said, “Many vulnerable and impressive young people now aspire to join this growing but extremely dangerous and certainly illegal and immoral business”, he said adding that most of the commentary and literature on oil theft placed emphasis on the cost to the Nigerian economy, which is huge. By some estimates, at the peak of our losses, we lost almost 400,000 barrels per day to oil theft and pipeline vandalism. It must be understood though that this figure represents what the country is losing not necessarily what is stolen.
Kuku explained that oil theft invariably entails the destruction of pipelines and once detected would mean the closure of the pipelines to effect repairs which cost a lot of money and take a lot of money and take a lot of time. He said, “The vicious circle of vandalism, detection, repairs and back to vandalism is what results into the estimated loss; part of which would of course be the actual stolen crude. It is therefore difficult to correctly estimate how much is actually stolen. The bleeding of our economy must stop so that we earn more to fund development all over the country. This bleeding must stop so that the Niger Delta people can fulfill their full economic potential, he said.
The Commander, Operation Pulo Shield, Major General Bata Debiro stated that his team has arrested and destroyed several vessels suspected to have been used for oil theft and illegal bunkering in the area.
The Director-General of the Nigerian Maritime Administration and Safety Agency, NIMASA, Mr. Patrick Akpobolokemi stated that oil has become a curse than blessing as a result of increased pollution occasioned by abuse of the product. He called for improved surveillance in order to ensure that perpetrators were arrested and prosecuted.
The communiqué issued alleged that the nation’s still lost commercial crude at the point of loading for export to the global market. Participants called for increased collaboration between government agencies, the Nigerian National Petroleum Corporation, international oil companies and security institutions to tackle oil theft, illegal bunkering and other vices in the industry.
They called for the early passage of the Petroleum Industry Bill, PIB, into law in order to create and empower adequate structures to stimulate operations in the industry as well as increased funding of agencies, fast socio-economic development of the Niger Delta, sanction of culprits and relocation of the headquarters of oil firms to the Niger Delta in order to increase their commitment to tackling oil theft and illegal bunkering as well as efficient operations of the industry at minimum cost. Some observers have also made strong case for improved monitoring of onshore and offshore areas in order to discourage vandalism and oil theft in the nation.Indigenous operators express worry as cost of oil theft hits N15.6bn by ngcareers