Crude Oil Theft: Nigeria’s New Security Architecture

For over two decades, crude oil theft has become a source of concern to Nigeria, just as it continues to affect the fortunes of the country. This is in addition to rendering Nigeria a lagging nation in the OPEC league. In this interview with ARISE News Channel, the chief upstream investment officer of the NNPC Upstream Management Services, Mr. Bala Wunti, speaks on the effort of the NNPC in curbing the menace.

Question
What exactly is the quantum of crude oil theft, given conflicting speculative figures in the public space?

Answer
A lot of data has been quoted; some out of context but in essence at the NNPC, based on all the calculations that we do, we are losing an average of 700,000 barrels, and perhaps the meaning of loss should be put in context here. In hydrocarbon accounting algorithms, there are three types of losses.
There is what we call engineering loss which is usually what is accepted by material balance and range between 0.01 to 0.05. Nobody accounts for them; it is part and parcel of the engineering process.

The second type of loss is that you produce the hydrocarbon but the hydrocarbon gets stolen by vandals and oil thieves. Those are called actual losses and the last one is what we call opportunity loss. Those opportunity losses arise from the fact that we are unable to produce what we planned to produce.
The budget is anchored on the basis of our 1.88 million barrels per day production and what that means is that if we recorded about 1mbpd in August, it means the difference between 1.8 million and 1 million barrel is what we are losing and that is what the treasury sees.

Now those losses I think where people get it messed up is whether the 700,000 barrels or 800,000 barrels is being stolen or some of them are opportunity loss and that is where the discrepancy comes in.
From our records, before we recovered, we were losing 700,000bpd translating to 21 million barrels per month, and if you consider an average price of this year at $90/barrel that will translate somewhere around $1.8 billion or $1.9 billion losses that we suffered.

Question:
The Chief of Training and Operations, Naval Headquarters of the Navy mentioned to the Senate that the NNPC has not been honest in the figures being released to Nigerians about oil theft. How will you respond to him saying the figures are being exaggerated?

Answer:
I don’t know the basis for that statement. Let me say one thing. We planned to be producing 1.8mbpd. This media house alongside other media houses including Organisation of Petroleum Exporting Countries (OPEC) have recorded that Nigeria’s production went as low as 1.1mbpd.
It is very clear that the difference will give you around 700,000bpd loss. I referred you to the algorithm of losses: the engineering loss, the actual, and the opportunity loss.

Secondly, I think Solomon Agada himself, a very respected Naval Officer, has come to counter that statement whereby he said he was quoted out of context. And thirdly, I would like to register our appreciation to all the armed forces including the Navy, particularly the Chief of Naval Staff for their collaboration.

They have even reported in their advert that they have arrested over 68 vessels doing bunkering and illegal activities. They also reported that a significant quantum of crude oil and products have been recovered by them.

What I would like to say is that all the security together with the operators are now working in sync to address this menace. But the question as to whether there is stealing, I think it is not in contention.

Question:
People attribute the increase in oil production to Shell’s return to Forcados Terminal and you talked about security strategies adopted by regulators, NNPC, among others. Can you take us through those strategies beyond Shell returning to Forcados?

Answer:
I think the key question to ask is where were Forcados, Brass Terminal, and where was Bonny during the force majeure? The reason is simply that we were unable to deliver crude to those terminals. And why were we not able to deliver crude to those terminals?
It is simply because of the security vulnerability. As I speak to you, Brass is in force majeure, Bonny is in force majeure. That is about 300,000 barrels deferred already.
We have been working hard with the private security contractors to return the Trans-Niger Pipeline (TNP) and we have succeeded to some extent, but not where we want to be. We are hoping we will open Bonny very soon.

The security situation is now restored together with certain activities that have been carried out to revamp what we see in Forcados. Forcados is back producing, Bonny will soon be back. Yes, indeed we are back, but up to today, one of our major trunk lines we can’t use because of security. Trans Forcados is back, Trans Escravos is back, Trans Ramos is back.

Now when you are talking about why we are talking about the security architecture, I think we need to look at why in the first place we need to put up a different architecture. What was the security architecture? Was it working? It wasn’t working.

We had to carry out a very robust diagnosis. And the diagnosis revealed about five major issues that needed to attack. Number one is that we have very difficult terrain and we can’t do anything about it.
The consequence of that is we can’t have much visibility, particularly in our maritime zone what you see in the blue water is not connected to the brown water, nor is it connected to the backwater.

Also, there was a lack of coordination with all the players whether regulators, security, and in the private sector. The community was absent, but most importantly, we were using technology sub-optimally and because of that, it was difficult for us to get end-to-end visibility.

The new security architecture is structured on laid-on technology. What it does is to bring together the security and intelligence agency in one table, the regulators in the other, and then bring in what was zero, the community into the other angle and without the community, we can’t achieve that.
Today we have visibility, and we are able to detect, deter and we are able to respond. The success that we recorded today was essentially because of this improved security situation.

We are now almost at an average of 350,000 to 400,000 barrels/day increase. At a certain level, we recorded up to 450,000 barrels/day increase in the given year.
That is why you can see we are now from 1.1mbpd daily to about 1.59bpd as of this morning. So, these are some of the things that we are able to record based on the new security architecture.

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Question:
With regards to this new architecture, what are the measures to ensure that this new security architecture is not open to sabotage? What is different from the previous architecture that you have on the ground? What are you doing to ensure that oil theft is totally and decisively dealt with?

Answer:
As we speak now, I can assure you that we are still identifying new ones and this is an ongoing and very dynamic crime activity that we are dealing with.
Second is the fact that I did mention to you what we didn’t have before. We now have an MTN technology capability that we can do whatever we need to do. But how do we deal with some of those things that we have identified? I think the numbers you mentioned are growing every day and as they grow, we are improving our capability of deactivating and removing them.

And today I can tell you in terms of the illegal refinery, we have incapacitated almost about 70% of what we have identified and we will keep identifying some of them.
It is mind-boggling what we discovered even as operators and every one of us saw the kind of sophistication where illegal connections are put on very major trunk lines including direct export lines on Forcados.

It couldn’t have been possible without the collective resolve of the private security guards anchored by the communities. We have short, medium and long-term visibility.
We say stop it first and second can we now develop further? I can tell you we have succeeded to an extent to stop this menace.

The question now is how to stop its growth. We introduced checking the checker and who is checking the checker? What that means is that we have four layers of security.
I am the coordinator of the industry’s security, I am only at the second level, and I don’t know what is happening at the third level and the fourth level. I don’t even know who they are, but I know they exist. So, even me I am being monitored as I speak.

So, I monitor other people and the other people have those who they monitor. The technology has come to stay. Our control centre is built to last and we are improving it every day.
Thirdly, we do recognise that any security architecture that does not involve the community will not work.
In the operation field, there are three people at play: the operators, the security agencies and the host communities. The communities were in those days not connected to that and they didn’t feel a sense of belonging.

We are now taking those boys who were being used as criminals and bringing them back to give them information on a very legitimate ground platform.
So, that is why we institutionalised it and today it is forming parts and parcels of organisation design that are going to last as long as we are going to continue to operate recognising that crime will be dynamic and people will upgrade their own way and we too have to think ahead of the criminals. A lot of things are going on.

Question:
Can you share with us the selection criteria for choosing private security contractors, what their role has been so far and whether there is a mechanism in place for evaluating their performance?

Answer:
As a very strong corporation with strong corporate governance and whatever we do, we comply with whatever we have to. But let me say the fact that the security architecture was intentionally designed under the SIMES.

What it means is that we sectorize the country into three regions based on vulnerability. We now integrate them with technology.

When we integrate them, we monitor them. We have a lot of monitors all over the place including visuals using drones and the rest of them and then we impose what we need to impose to ensure there is no violation of those processes and lastly, we sanction. We have achieved some of those things.

To be able to get those integrations and intelligence, we know that the community needs to come in. The communities are many so what we did was to put them in a structured format. That structured format follows the three thematic regions that we identified which we call the West, Central and East. And we selected through our very transparent procurement process three contractors.

Incidentally, one of them being – Tantita Securities Ltd, associated with Tompolo happens to be the most visible and there is no gainsaying the fact that most of the successes recorded were recorded under him.
We have another contractor called Maton Engineering who is responsible for Brass and all the central areas and we have the Pipeline Infrastructure Nigeria Limited (PINL) responsible for the East.

So, there are three contractors based on the sectorization of the regions and each one of them is reporting and obviously, there are more and more activities happening especially in the maritime economic zone towards the West than what you have in the East which is mostly around the illegal refineries and everybody thinks that all the contract was given to Tompolo.

In terms of the process, we went out to look for which company is involved in the security service that we need and we came across these three through a structured procurement process. We did not skip anything.
We had to screen the companies by all the intelligence and security agencies because the steering committee of the whole industry security architecture involves the chief of defence staff, the two regulators, and the IOCs, the national security adviser, DSS and everybody.

They screened the companies before we went to Mr. President (Muhammadu Buhari) and we got his approval. It was the presidential approval that was based on all the security recommendations that brought about these three companies. Are we monitoring? Yes we are monitoring.

I did mention that the structure is in such a way that we are checking the checker who is checking the checker. Incidentally, Tompolo or Tantita is being monitored just like I am being monitored and also there is every reporting structure that we have today.

We have our incident report format. They are compelled under the contract to report every incident that they see.
They submit daily, weekly and monthly reports and not only that, we have the right to monitor and interrogate what they are doing and because we are also monitoring what they are, we compare what we heard from them and what we see.

In terms of the segregation of function, I think when we started there was a lot of confusion but that has been clearly delineated. Today, government security agencies and private security contractors are working in sync.
Every one of them understands his limitations. Today, we have everybody under one wrap.

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Question:
Don’t you think it will be a deterrence naming the oil thieves, and beyond that after detection what is the punishment for it? Is there a clear policy as to how these individuals will be dealt with?

Answer:
Since the time the group chief executive officer [GCEO] spoke about the arrests, much more has been done by people who have the backing of the law to arrest and when you arrest them, there are still protocols you have to follow.

Some of them as I speak to you are under prosecution. The government particularly the security agencies including financial intelligence agencies are following the money. Sometimes when you go out quickly, you tend to compromise certain things and I believe the details and diligence that are being implemented. It is not whether or not those people will be named. The people will be named. The question is when?

I think when government agencies and intelligence agencies have concluded what they are doing, the people involved will be known. As to who and who, you will be shocked that there are a lot of people.
The security agencies have the power to announce. They will do the announcement. Thanks to the judiciary, they have appointed specific judges across the regions to deal with this.
The high court is also trying to bring technology to these dedicated courts. These things were not in existence. We are trying to build them. We are getting a lot of corporations from the office of the Attorney General together with the court system.

The High Courts in particular that have appointed judges, we are trying to properly equip them with technology to deal with this.

Question:
Vessels leaving with stolen crude, we were told, were destroyed. Won’t that amount to destroying the evidence. Is it a wise thing to do, to destroy stolen crude? Or even destroy the facility and destroy the evidence? Because this has been done again and again, why is that a good strategy you have adopted?

Answer:
Again, they say history and experience must be brought on board when you want to do certain things. If we have been doing something and we have not been getting the results, we need to change tactics.
We are not just destroying; we have to deter. The way the military or the security institution look at this, they look at it as a war on the nation.

They view it as a war against the state, and therefore when they get there, they must do whatever they have to do including destruction as legitimate.
As civilians, we cannot do it. If you notice, you will see it was the military that did the destruction. Before they destroyed it, all evidence was collected including the people.

The people were paraded, and interviewed by journalists, and they were taken to be prosecuted. Before then, all investigation was done and facts and documents collected so there are no two ways about it.
That is how we came to know that that particular vessel has been operating with a different name. Different names and different times, and we know their destination. All these things were anchored and we got it. Some of them involve some countries and I think different bodies in this country are taking that into consideration.

Now when you destroy, what we have found is that, because of the difficult terrain, sometimes even when you are arrested, how can you take it to the court for evidence?
It could be very difficult, and we have to do a lot of things to change the law. And we don’t even have the capability to drag some of those things and use them as evidence.

Secondly, we have seen time without number, assets are reported to have been arrested, two days later you hear different kinds of stories, either the vessel sinks, or the vessels were discovered to have legitimate papers and were allowed to go.

And you see the same vessel coming back in a different name. I think what the military did this time is to send some strong signal, that everybody we see on our maritime border is coming for war, and because you are coming for war, we will confront you in that same manner.

The military in its own wisdom, gave the directive that this asset be destroyed.
So, the fact that we are destroying it doesn’t mean we are destroying evidence. Before destruction, we have done everything including arresting the crew, getting all the documentation around the vessels, and knowing exactly what the DNA of that vessel is.

Question:
You mentioned a holistic approach to dealing with all these thefts – operators, security operatives and communities. I would like you to detail your community approach. Is there a process of reporting incidences, around whistle-blowers, how are you engaging the communities on these incidences?

Answer:
I did mention that the private security contractors; their primary jobs were to operate in their communities, they are community contractors. And so, what they do is that they go to every place and they recruit people in that community.

And that’s why when we started, we had a lot of problems, but as every community discovered that their people were being recruited to do these kinds of jobs, and they were being rewarded legitimately, you see that the situation has now become normal.

The community has to be brought in under a structured organisation. So, if you go to the western community, they are anchored under Tantita, if you go to the central communities which are from Bayelsa, Imo and Rivers are anchored around Maton.

They are all engaged there, before going live, significant consultation was done, including visiting each of the state governors in the oil-producing region. We are talking with the state governors, expecting actions from the state governors, not only the specific community but each of the state’s governors are properly consulted and engaged.

We provide them with the report and they have seen the benefit and improvement in the direction we are going. Because we can’t reach everyone in the community as it will be chaotic, we decided to recruit forces that will be able to put things in check around the community.

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Question:
What is your mode of communication and consultation with these communities?

Answer:
We based it on trust. We lost trust before, but we have recovered our trust. We visit everywhere, and you have seen us. Unlike before when we sit down in Lagos and try to manage what is happening in Yokri. Today, we went to Yokri, we interacted with the community leaders, influencers, and young people and we had open doors.

Most importantly, we now have a platform where they report whatever they see as whistle-blowers, and people are rewarded handsomely for that. Just go to www.crudeoiltheft.com and report whatever you want to report.

And if the intelligence is good enough, you will be rewarded handsomely for it. And we have been receiving tremendous reports on that platform.

Question:
Are these strategies short-term or are there structures in place to ensure it is long-term? Secondly, the big elephant in the room, about a week ago NNPC promised two billion litres of fuel that will be made available, but there is still fuel scarcity in Lagos. When is the fuel in NNPC custody going to be available?

Answer:
I was a managing director of the then Petroleum Products Marketing Company (PPMC). I can tell you how it work, the challenge about making it available and accessible in an acceptable format.
That is what NNPC does because if they don’t do the security of supply, everything will be challenged. We have supply, we have distribution and we have retailers.

The challenge has always been around distribution than supply. If you have a supply problem, it lasts longer. So, we have learned from that fact and we never go out of supply.

The problem is distribution, needless to say, 60 per cent of the country source their product from Lagos. At the last count that we checked, we only had 35,000 trucks cross this country.
They go to Maiduguri, Sokoto and Calabar. The rate at which these trucks make their turnaround has changed significantly from one week to 10 days and they hardly do once a month. While roads are bad, they ride about in the rainy season and so many other constraints.

To tell you, we all know the things happening around the Apapa axis. There was a blockage, load trucks of anything including products ready to leave were not allowed, and because of that, it created a problem.
If you stay one day without delivering the product in Lagos, you need a minimum of one week supply at a higher rate to control the effect. If you wait two days, it will take almost three weeks, and if you wait three days, it may require you to do one month, and this is a major problem. I can tell you that I see the dashboard every day.

These two billion are supposed to be in our stock depot, whether NNPC depot or another private sector depot. These have been reported transparently by the ministry and by every stakeholder. We also have those in the marine.

Those in the marine we are referring to, are those who have tender notice of readiness. When you tender notice of readiness in a given country, you won’t be able to move until that product is offloaded. If you move, you can be accused of stealing and cannot be allowed to go.

When you accumulate what we have in the marine, and what we have in the stock depot, that is what constitutes the two billion litres. But your ability to take these two billion litres to the station is where the problem lies.

The major problem is not supply but distribution issues. I am glad to say that a lot of effort has gone into it, including the Lagos state government’s contribution to level what is happening in Apapa.
In Abuja, it has reduced significantly, and we hope that it will continue all around. Whether upstream, midstream, or downstream, the directive of the group chief executive officer, Mele Kyari is that you are a product distributor, go there and take control.

I can tell you clearly, everybody is on the street to support what we have to support in getting this product into the station.