Crude Oil Theft: Act Of Terrorism Or Lack Of Political Will?

Recently, the Minister of Petroleum Resources raised the alarm over the increasing menace of crude oil theft describing it as another face of terrorism. JULIET ALOHAN takes a look at the situation and writes on whether the challenge is insurmountable or simply aided by the lack of political will to confront the threat on the nation’s commonwealth

The rising level of crude oil theft and pipeline vandalism particularly in the Niger Delta region has reached an all-time high with the Minister of Petroleum Resources, Mrs Diezani Alison-Madueke recently describing it as another face of terrorism. The menace which led to the declaration of amnesty for repentant militants in the Niger Delta region by the late President Umaru Musa Yar’Adua, has assumed an even higher dimension prompting the question about the effectiveness of the amnesty programme which is costing government billions of naira.

Industry observers believe that the amnesty programme for militants seems to have waned, going by available statistics of crude theft. Statistics show that a total of 350,000 barrels per day (bpd) was lost to illegal bunkering in 2012, representing an increase of 45 per cent over the figure for 2011, and 67 per cent over that of 2010, while the trend for 2013 is even more alarming. They insist that unless government summons the will to fight the menace the situation will further worsen the country’s economic woes.

One Too Many Attacks
The ugly development has made operations in the Nigerian oil and gas industry one of the most expensive in the world according to the Chairman of Shell Companies in Nigeria, Mutiu Sunmonu.  Attacks on production facilities have led to several shutdowns and declaration of force majeure by the International Oil Companies (IOCs), ultimately resulting in loss of revenue to the government. In April, 2013, oil giant Shell; shut-down the 150,000bpd Nembe Creek oil pipeline due to the urgent need to clear away illegal connections.

Nigeria Agip Oil Company (NAOC) in the same month declared a force majeure regarding crude oil lifting at the Brass terminal and suspended its activities in Bayelsa State, following the intensification of illegal bunkering activities and the vandalisation of the 10-inch Kwale-Akri-Nembe-Brass oil delivery line. Another explosion and fire at a crude theft point on Shell’s facility at Bodo West in Ogoniland also forced the company to shut the Trans Niger Pipeline (TNP), in June 2013, deferring some 150,000 barrels of oil per day (bpd), to mention just a few.

Data from the NNPC revealed that 53 break points were discovered along the 97km Nembe Creek Trunkline in the first quarter (Q1) of 2013 reducing April and May monthly average oil production to about 2.2 mbpd and decreasing revenue that should have accrued to the Federation Account for the period by about $554.0 million (equivalent to N83billion).
Acting Spokesperson of the Corporation, Tumini Green, disclosed that crude oil production within the period dropped to 2.1 million bpd as against the estimated production figure of 2.48m bpd.

Failed Attempts To Tackle Challenge
Several attempts have been made by the federal government to tackle the challenge to no avail. The collaboration forged between the NNPC and the Inter Agency Maritime Operation Committee, whose members are drawn from the NNPC, Nigerian Navy, Air Force, Customs, Police, SSS and the Judiciary has not done any good.

In a meeting with Yakubu in Abuja, the Chairman of the Operation Committee, Rear Admiral E. O. Ogboh, said the committee was established with a mandate to address the issue of illegal bunkering in the nation’s maritime waters, but crude theft still thrive in the face of the collaboration.
There has also been the constitution of a Committee by the National Economic Council (NEC), comprising of some Governors, NNPC, Department of Petroleum Resources (DPR), IOCs, security agencies and other relevant bodies to work out modalities to mitigate the menace to no avail. Even the juicy pipeline protection contract awarded to some ex-militants warlords at a combined sum of N5.6 billion ended up as yet another drain on the nation’s scarce resources.

A breakdown of the contract showed that Mujaheed Dokubo-Asari got $9 million, Ebikabowei “Boyloaf” Victor Ben and Ateke Tom, each got $3.8 million, while Government “Tompolo” Ekpumukpolo, got the largest share of $22.9 million to engage their foot soldiers to protect the pipelines, but the menace has remained on the increase.

To further worsen matters, it has been alleged that some bad eggs in the Military Joint Task Force (JTF) deployed to the region to protect oil personnel and facilities have been accused of complicity in the illegal bunkering activities. Not even the much hyped crude oil finger print which Nigeria claims to be championing to detect crude oil theft as purchased by other nations has helped matters.

Alleged Culpability Of International Community
The Minister of Petroleum Resources, Mrs Diezani Alison-Madueke, recently declared that the grave phenomenon of oil theft and its global support system has continued to remain a cog in the wheel of the nation’s high economic growth trajectory. While delivering a presentation titled, “The Strengths and Obligations of the African Diaspora,” recently in London, at the Powerlist 2014, the minister said efforts at combating the menace locally is made more complicated because of the international slant of the crime.
“Theft of this magnitude is not only highly technical, but it is also an international-level crime.  It is aided and abetted by syndicates outside of Africa who are the patrons and merchant-partners of the oil thieves,’’ she said. She also made a similar accusation while speaking at the 2013 Offshore Technology Conference (OTC) in Houston, Texas, USA, where she called on the global community and international oil traders to drop the appetite for stolen Nigerian crude oil.
Presenting a paper with the theme: ‘Development efforts in the West African Exploration Zone,’ the minister who spoke through the NNPC GMD, Engr. Andrew Yakubu said, “It takes two to tango, if those stealing our crude do not find a market for it there would be no incentive to steal that is why we are appealing to the international community to take action.”

Economic Implication
In the meantime, while government battles with how to effectively bring the situation under control, it is estimated that between $6bn and $12bn is lost to crude oil theft annually, with oil theft peaking at about 350,000 barrels per day (bpd), higher than the quantity of oil produced daily by Gabon or Equatorial Guinea.
According to the Group Managing Director of NNPC, Engr. Andrew Yakubu, the persistent attacks on major pipeline arteries supplying crude oil to export terminals has impacted negatively on the nation’s economy. Speaking  during his submission to the Senate and House of Representatives Joint Committee on the Medium Term Expenditure Framework (MTEF) for the period of 2014 to 2016, Yakubu lamented that the continuous crude oil theft, pipeline vandalism and shut-ins have constrained the sector from meeting its revenue projection. He said the oil and gas sector is a key component of MTEF adding that any impact on it will have a negative effect on revenue flow to the federation account.

“The critical and most important point to note here is that when the artery conveying crude oil to the terminals is hit, this reduces our production volume by 150,000 barrels per day and for the period that the line is down that accounts for the drop in crude oil production. From February to date we have witnessed so much breaches and each time we go down about 150,000bpd goes down,” Yakubu informed.
He said the daily crude oil production figure for 2013 has been very erratic as a result of the several attacks on the arteries stating that crude oil production figure ranges between 2.2mbpd to 2.3mbpd.  According to the Corporation, about $2.23 billion (N191bn) revenue that should have accrued to the federal government from oil proceeds was lost to the activities of crude oil thieves in the first quarter (1Q) 2013 alone.

Way Forward
Appalled by the worrisome level of crude theft, experts and industry captains have picked holes in government approach to tackling the menace and called on the federal government to apply multi-dimensional strategies towards finding a lasting solution to the challenge. Managing Directors of IOCs who spoke at the 2013 Nigeria Oil and Gas (NOG) Conference and Exhibition in Abuja, noted that the issue of crude theft has grown to become an organised industrial scale business requiring more than one approach to fight.

In his presentation, SPDC Chairman, Mutiu Sunmonu, said the war against crude theft is no longer a war against the poor people of the Niger Delta, “it is a war against the big fishes,” he stated. While noting that the finger print tracing which the federal has decided to adopt as part of efforts to end crude oil theft, was crucial, Sunmonu maintained that the country still needs to apply other strategies.

“We need strategies to engender some sense of outrage so that all Nigerians can see crude theft as crime against humanity and the environment and begin to condemn it,” he said. He also advised the government to look for ways to make it more difficult for the oil thieves to access the pipelines by laying the pipes deeper below the ground. “I don’t think one solution is okay, government has to look for multidimensional strategies to end this challenge,” Sunmonu maintained.

For his part, Managing Director of ExxonMobil Nigeria, Mark Ward advised the federal government to look into the issue of poverty in the host communities which he maintained was playing a major role in the rising level of crude theft. Also speaking, former Venezuela’s Minister of Energy and Mines, Dr. Alirio Parra, urged government to apply four major strategies which he listed as identifying the market where Nigeria’s oil is sold, tracking the money from the illegal business, incorporate the communities in the fight against bunkering and to raise public outrage against crude oil theft.

Furthermore, an industry expert who spoke to LEADERSHIP on the matter explained that the pipelines, being strategic assets, ought to be conventionally outsourced by government to competent companies for protection, where it feels it is not capable of protecting them.  According to him, the global practice is that the owner of the assets works out the safety and security needs assessment of the infrastructure using a consultant, and where needs be, contract a third party to protect the assets if it becomes obvious that it cannot protect it.

He however, stressed that such services are usually contracted to the best companies after advertisement and specifying which artery of the network is most prone to vandals that needs protection. The expert who did not want to be named said the manner in which the pipeline protection contract was handed over to ex-militants under the table sends the wrong signals to the international community over Nigeria’s commitment to the principles of extractive industry transparency, which the country is a signatory to.

Also speaking to LEADERSHIP, Nigeria’s representative on the Board of the Global Extractive Industry Transparency Initiative (EITI), Faith Nwadishi expressed worry that despite the contract awarded to the ex-militants and the money paid to the JTF for the protection of the assets, no visible result has been seen.  “The question to be asked is what has changed since ex-militants were paid this money? Why are we not getting results? Is the money meant for jamboree? Are they paying it to them to acquire their ships and enlarge their cabal?” Nwadishi who is also the Country Director of Publish What You Pay Nigeria, queried.

Against the background, there is therefore, the need for government to put sentiments and blame-game aside and engage in strategic reassessment and re-orientation towards bringing the challenge to an end in the interest of the nation’s economy.