Oil Theft in Nigeria: The Bleeding Continues

Recent pronouncements by the Federal Government indicate that the nation loses over $1bn monthly to activities of oil thieves in the Niger-Delta region.  The financial and environmental impacts of illegal, industrial scale oil bunkering in Nigeria pose a serious threat to the nation’s wellbeing and require urgent interventions by relevant stakeholders. Ag. Head of Investigations, Yemi Olakitan, examines the subject.

The recent sharp drop in global oil prices has only compounded an already bad situation. With an estimated 400,000 barrels of crude oil lost to oil theft daily, the price volatility in crude futures underlines the dangers confronting the nation’s finances, which is already feeling the shockwaves including devaluation of the naira, adjustments to the 2015 budgets and the looming spectre of a moratorium on new government projects.

The African Development Bank Group had in its African Economic Outlook 2014 listed oil theft as one of the factors responsible for the drop in oil revenue in Nigeria.  The report, which covers 54 African countries, presents the current state of economic and social development as well as prospects for countries in the continent. According to the report, Nigeria had been battling with serious disruptions in oil production and lifting operations occasioned by multiple leaks, pipeline vandalism and oil theft.  It said: “growth of the oil sector was hampered since 2013 by supply disruptions arising from oil theft and pipeline vandalism.”

It said, “Negative growth of the oil sector may also continue to drag down overall growth until a lasting solution is found to the challenges of oil theft.

According to reports, Nigeria is ranked worse than Mexico, Iraq, Russia and Indonesia among the top five countries most plagued by oil theft.  Nigeria’s losses to crude theft are also put at $1.7bn, about N312bn per month, representing 7.7 per cent of Nigeria’s Gross Domestic Product, GDP.

Illegal activities in the oil producing regions range from illegal bunkering, refining and sale of stolen crude and export of stolen crude to the international market. What many find difficult to understand is how vast amounts of crude oil are taken from pipelines and transported via large barges, loaded on ships which then “disappear”.

Only recently, it was reported that the Nigerian Navy destroyed 53 illegal refineries in Ashafama forest in Warri South-West Local Government Area of Delta.

The Commander of NNS Delta, Capt. Musa Gemu, told newsmen in Warri that 53 metric tonnes of crude was burnt during an operation against bunkering. Gemu said the command would continue to fight illegal oil bunkering until the illicit business was completely eradicated in the area.  He warned those engaging in illegal oil bunkering to desist from it or face the wrath of the law. Gemu appealed to the Chief of Naval Staff to dialogue with the management of the Nigerian National Petroleum Corporation to assist the command with smaller boats to navigate narrow creeks.

The naval commander also said his command had on September 18 impounded a large vessel in Dodo River, Delta, with about 540 metric tonnes of stolen crude on board. The 11 Nigerian crewmembers were arrested.  The list of such arrests is endless, but those caught represent just a minute fraction of those who get away with such activities.

Industry experts including oil firms have estimated the volume of oil theft at between 100,000 and 400,000 barrels per day. What is not in doubt is that those involved are largely beyond the reach of the law

Individuals benefitting from the sale of stolen oil do not re-invest in oil exploration or production. The bulk of earnings are diverted outside the country into international bank accounts.  Sabotage to pipelines and flow-stations and careless handling during the bunkering process cause environmental damage to the region.

According to environmental experts, vast areas of the Niger Delta have become polluted with oil as a result of the many spills associated with illegal bunkering and pipeline sabotage while the cost of remediation is mind-boggling.

Traditional livelihoods, such as fishing and farming, have become increasingly difficult if not impossible to pursue.  Alternative jobs, however, have not been created for the largely unskilled and poorly educated residents of the impacted areas.

The Nigerian National Petroleum Corporation, NNPC had repeatedly warned that the acts of illegal oil bunkering in the Niger Delta could expose the region to the worst environmental disaster ever faced in the history of the country. The corporation estimates that the country presently loses over 180,000 barrels of crude oil per day to oil thieves, warning that if unchecked, such criminal activities could cripple the nation’s oil and gas production.

The Executive Secretary of the Nigeria Extractive Industries Transparency Initiative, NEITI, Mrs. Zainab Ahmed, was among eminent Nigerians who had raised alarm over the high rate of oil theft in parts of the Niger Delta. She urged government to declare a national emergency to tackle the menace.

Ahmed noted that a recent facility tour of Shell oil exploration activities in the Niger Delta conducted by the NEITI management had revealed “mind-boggling theft of petroleum products”.

“The increasing rate of stealing of crude through illegal oil bunkering activities in the creeks is troubling”, she had said.

Shell, is reported to be the worst victim due to its vast oil and gas assets in the Niger Delta. The company recently came out with a statement lamenting the impact of illegal oil bunkering on its many pipelines.

The justification often given for the regrettable acts is that residents who have no opportunity to earn a legitimate living have more incentive to engage in pipeline sabotage and oil theft. To make matters worse, some of the oil producing communities have developed a new “business model” of demanding monetary compensation for environmental damage, which is usually caused by illegal oil bunkering. Villagers are keen to direct oil spills whether accidental or intentional to their communities for the short-term economic benefit of selling the oil on the local market or claiming damages from the international oil companies, IOCs.

According to reports communities rupture pipelines in order to claim compensation from resultant spills. Communities also form “service companies” which offer “protection” or “environmental clean-up” services.  Some village leaders allegedly charge IOCs for operating in their areas with the threat that if they do not get “settled” illegal bunkering or militant attacks could occur.  Not too long ago, the Niger Delta activist and Chairman of the Itsekiri Regional Development Council, Chief Ayirimi Emami, had slammed oil bearing communities in the region for “actively and passively”  aiding the illicit trade instolen oil.

He said, “The host communities cannot claim ignorance about those involved because those doing it are not ghosts; they are humans who live in the community. So, they are either actively involved or passively, through their acquiescence. Most members of the host communities benefit through handouts and other forms. So, they keep quiet and would not offer information or report the criminal acts.’’

“The security agencies are also involved, it is very simple: Delta State for instance has three exit/entry points. They are at Escravos, Forcados and Ogheye (in Warri South West, Burutu and Warri North local government areas). There is no way a vessel can enter or leave without the military seeing them. If they are not involved how do the illegal bunkering vessels pass?” he queried.

His position was supported by Governor Emmanuel Uduaghan of Delta State who said: “All boats are stopped at these checkpoints. I have been stopped every time I travel in the area. If I, a governor, can be stopped how do the criminals pass unhindered?”

Emami said the technical skills needed to carry out some of the illegal bunkering operation are beyond a layman. He advised the IOCs to look inward in the quest for answer to illegal bunkering.

In a special report in 2009 titled: ‘Blood Oil in the Niger Delta’, activist Judith Burdin Asuni, founder and executive director of Academic Associates Peace Works, had noted that between 30,000 and 300,000 barrels of oil per day is carted away by oil thieves who operate in Niger Delta.

The report, which was also based on information from local communities; members of the armed groups in the region, as well as interviews with U.S., British, Dutch, and UN officials, identified three types of illegal oil bunkering as small-scale pilfering for the local market, large-scale tapping of pipelines to fill large tankers for export, and excess lifting of crude oil beyond the licensed amount.

In 2010 alone, the JTF impounded vessels carrying 724MT of stolen crude. The JTF announced during one its operations that it destroyed about 6,000 illegal refineries across Niger Delta. More than 150 persons suspected allegedly involved in illegal bunkering were said to have been arrested. Also, the Nigerian National Petroleum Corporation (NNPC) also revealed that the task force arrested vessels carrying 1.3million barrels of stolen crude.

The oil workers pointed out that the volume of oil stolen in Nigeria, was more than double the total production of Ghana and could destabilise any government.

What could be a way out of this perennial problem that has defied solution? The Federal Government thinks that lifting the ban on oil bunkering could discourage small scale illegal activity for a start

According to social commentator, Pa ????? Ogunjobi, “The only solution to oil theft in Nigeria is what the President Goodluck Jonathan has done. Jonathan redefined the word bunkering, giving it the actual meaning. Bunkering is not oil theft but the legal business of supply petroleum products at sea. The president had also gone a step further by lifting the ban on bunkering, which is perfectly necessary to create jobs and give an opportunity for companies who desire to the business legally and with transparency in The Niger Delta area”.

Speaking further, Ogunjobi noted bunkering is not really an illegal business what people confuse with bunkering can best be described as oil theft.

“If we combine that with adequate law enforcements and give the people who are willing to do the business correctly the necessary support they need oil theft will soon be a thing of the past. Don’t forget that criminality is a child of hopelessness particularly among the youth. Government must continue to find ways to engage the youth positively in the Niger Delta area in other to arrest criminal activities that are having negative impacts in the economy.

“The resumption of bunkering services in the country will save oil, gas and marine operators the stress of going to Senegal, Cape Verde and Cote D’Ivoire to fuel vessels operating in Nigerian territorial waters and also earn the country some foreign exchange and reduce illegal oil bunkering or oil theft” , he said.

Reports reveal that the business, if properly handled, has the potential to take more than 10,000 Nigerians off the unemployment market. Much of these opportunities are for jobs on Nigerian flagged bunker vessels and licensed firms in a country, where over 5,000 ocean liners shuttle cargoes annually.

Analysts further defined bunkering as the lifting of petroleum products from one point to another with a license. In the absence of bunker stations in Nigerian waters, approved operators largely use boats to distribute fuel in the territorial waters and riverine areas. Bunkering provides fuels such as marine diesel, low fuel oil, lubricants and others to sea craft. Bunkering companies also provide fresh water to vessels at sea.
Unfortunately in Nigeria; oil bunkering has been tied to oil theft. This erroneous position was perpetuated by senior government officials in relevant agencies helped by the media and this has robbed the country of legitimate foreign exchange earnings in the legal business of bunkering.  It is not unusual to find reports in the media claiming that Nigeria loses billions of dollars annually to ‘oil bunkering,’ whereas the alleged loss was due to oil theft or illegal bunkering.

Navy Captain S. O. Ayeni, head of the Directorate of Marine Services, Nigerian Navy, however, warned that any ship that must bunker in the country’s territorial waters must fulfill the requirements of the Navy.

“The operator will be expected to present to the Nigerian Navy headquarters, an application for bunkering clearance, detailing the vessel involved, location of bunkering operation, or discharge point, quantity of bunker fuel and duration of the operation.”

Operators must obtain licenses and certifications from the DPR and the Nigerian Maritime Administration and Safety Agency on the quality of the products and the vessels.

It was in 2014 that the Director, Department of Petroleum Resources (DPR), Mr. George Osahon announced federal government’s decision to return oil bunkering business activities in Nigeria’s territorial waters as a legitimate business.

Historically, bunkering started in Nigerian waters as a legitimate business with licenses issued by the DPR in 1979. But by 1984, the business was stopped by the General Ibrahim Babangida administration due to abuse in the system. At that time, crude oil theft was beginning to rear its head in the country and it was believed to be perpetrated by firms engaged in bunkering.  General Babangida’s answer to the problem was to place a total ban on the supply of bunkers to vessels on the waters; an action experts say is tantamount to throwing away the baby with the bath water.  Chief Olusegun Obasanjo tried to resuscitate bunkering services in Niger Delta area where operation license was pegged at $60,000 (about N7.5m then). The then Information and Communication Minister, Frank Nweke Jnr, said that the revocation of the ban became pertinent due to the decision of government to strengthen the capacity of its appropriate institutions to manage and supervise that aspect of operations in the oil sector, which was expected to rake in about $1 billion yearly into its coffers.

However, somevessels that required bunkers were supplied through the black market, while those that could not patronise illegal supply channels due to issues of corporate governance guarding their operations resorted to neighbouring countries to fill up their tanks.

The lifting of the ban on bunkering is expected to have reasonable positive effect on the economy and oil theft. New companies will come up to render bunkering services and a lot of Nigerians will be engaged directly and indirectly by these companies.  Players in the endangered indigenous shipping may have to look the direction of bunkering as it is related to their original business.

The DPR Director, Mr George Osahon says the resumption of bunkering operations in the country will generate revenue for the government and create employment opportunities that will buoy the economy.

President of Nigeria Indigenous Shipowners Association, NISA, ????? says there are still a lot to be done to ensure that the business is not messed up again.  Operators involved in bunkering services and using Nigerian-flagged tankers are also required to show proof that appropriate duty was fully paid, while vessels leased from abroad must obtain temporary importation permit from the Customs. This is the position of the Nigeria Customs Service (NCS).
The Deputy Controller, Operations, Eastern Marine Command, NCS, Port Harcourt, Mr Edorhe Elton says, bunkering vessels must not leave the Nigerian territorial waters, whether they were home-used or leased.

Conveying President Goodluck Jonathan’s approval to stakeholders in Lagos the Director, Department of Petroleum Resources, Mr. George Osahon, described bunkering as a downstream business involving the fuelling of ships of all kinds on the high seas, inland waterways and within the ports. Usually, the fuels supplied include Automotive Gas Oil or diesel, Low Pour Fuel Oil and recently, Liquefied Natural Gas.

“Bunkering as a legitimate business line should not be confused with illegal trade in stolen crude for which the same term has been freely used in the Nigerian lexicon,” he said.

Potential beneficiaries from the resumption of bunkering operations, , include fishing trawlers, LNG tankers, Very Large Crude Carriers, Ultra Large Crude Carriers, coastal tankers, bulk cement cargo carriers and bulk wheat cargo carriers.  Others include General Cargo Carriers, container carriers, Floating Production Storage Offloading vessels, FSO, rigs supply vessels, tug boats and marine support vessels and other offshore oil facilities.

The Executive Director, Anyiam-Osigwe Group, the parent company of Nuel Energy Limited and PSTI Oil & Gas, which is involved in bunkering operations, Mr. Michael Anyiam-Osigwe, said, “The bunkering business was suspended for quite some time because there is a misconception about it in Nigeria. When we talk about bunkering, people think it is an illegal activity and this is not correct because when you steal crude, that is not bunkering, it is crude oil theft. If you are doing illegal bunkering, it means you are engaged in bunkering operations without a licence.”

In an attempt to explain what led to the widespread misconception about oil bunkering in the country, Anyiam-Osigwe, said, “What I suspect is that when people steal crude oil, they use vessels to sell it to other ships on the sea. So, that becomes illegal bunkering because you are not licensed. It is also oil theft because you have stolen the crude and you are selling to users as though you are bunkering. This is because once you are doing a ship-to-ship transfer, it is called bunkering. In other words, once a smaller ship is pumping petroleum product into a bigger ship, that is how bunkering operations work.”

According to the Chief Executive Officer, Ships and Ports, Mr. Bolaji Akinola, an average of 5,000 sea-going vessels tie up at various Nigerian ports every year. Bunkering will open up the business and help in curbing the menace of oil theft.

Some have argued that bunkering is another way of saying that oil stealing should go on, Lagos lawyer, Barrister Muniru Shittu said, ‘such critics do not understand the issues at stake. Bunkering will hopefully reduce or eradicate oil theft in its entirety. The added advantage is that it will create employment for the teeming population of Niger Delta youths some of whom, despite the amnesty has insisted on profiting illegally through oil theft. Bunkering gives them an opportunity to stop stealing and to do dome thing positive, legal with their lives which will give peace of mind to everyone involved and also bring progress to the nation.”

Speaking further, Shittu said, “We cannot say that since the ban on bunkering was lifted oil theft has stopped, No, it is not an overnight job but one thing that is sure is that there is hope that, as more and more people enter the business and since they can buy oil legitimately and sell at a reasonable profit, the problem of oil theft or illegal bunkering will soon be forgotten.

According to him, “The people of Niger Delta should respect the memory of environmental activist Ken Saro Wiwa and stop the menace. They should embrace the opportunity offered them by the administration of President Goodluck Jonathan. They should apply for the licenses and do clean business, this is what will bring meaningful progress to our nation, end oil theft and clean up our environment.”

However, with the huge profits reaped from oil thefts and failure to arrest and prosecute the big fish mired in the “business”. The likelihood is that it will be business as usual until the right political will to end the bleeding of the nation.