Nigeria’s Crude Oil Theft Crisis and Leadership Deficiency

The reality of the treasonous theft of the nation’s crude oil is suddenly being given the attention it deserves by the administration of President Muhammadu Buhari, even though it should have come much earlier.

By no means a recent phenomenon, yet this theftuous recurrence has currently been elevated to brazenly new heights and it is threatening to crush the country’s fragile economy and further degrade the environment.

While vandalization of pipelines channeling crude oil from wells to designated platforms dot news reportage intermittently, the current attention to the criminality, which began with the recent sobering admission of the gravity of the of crisis by businessman and philanthropist, Tony Elumelu, has since been corroborated by a host of stakeholders and principals with inside knowledge of the oil sector in the days that followed.

Clearly, that this crisis even festered at all under the watch of state governors in the South-East and the Niger Delta, the Minister of Petroleum Resources, the President, the Navy, Police, EFCC, DSS and the Civil Defence points to the failure of leadership or lack of it and of course, zero accountability.

How do we even comprehend that more than 80 percent of the country’s oil production is lost to brazen criminality daily and no one amongst the persons we put in charge of these precious resources is being held accountable? I find this incomprehensible.

In a series of tweets, Elumelu, chairman of UBA Banking Group and Heirs Holdings, whose TNOG Oil and Gas Limited acquired a 45 percent stake in the 27, 000bpd OML 17 last year, drew the obvious link between the country’s inability to meet its OPEC crude oil production quota and the massive theft of our crude.

He pointed at the Bonny Terminal, which ought to be receiving over 200,000 barrels of crude oil daily for export but was instead limited to less than 3,000 barrels because of pipeline breaches.

The significance of this disclosure is that the country, which is solely dependent on earnings from crude oil to fund its budget, is not raking in the kind of petrodollars it should be getting, even though it is meant to be a boom season for oil producers, courtesy of the West’s sanction on Russia over its invasion of Ukraine. This is a major contributor to the scarcity of dollars in the country and the significant weakening of the naira on the streets.

Before Elumelu’s outburst, residents of oil producing states, particularly those in Rivers State, have for months been calling on the government to shutdown the illegal refining of crude by thieves as soot enveloped the state’s skyline.

Also, warning that the theft of crude oil has crossed critical levels, Austin Avuru, the founding MD/CEO of Seplat Petroleum Development Company, the leading indigenous Nigeria oil and gas exploration and production company, called for the declaration of a national emergency in the oil and gas sector.

In a report titled, ‘Reining in the Collapse of the Nigerian Oil Industry’ and published by the Africa Oil + Gas report, Avuru admitted that as much as 80 percent of oil production never reaches the export terminals. The seriousness of the situation was brought to the fore when he declared that “the entire export pipeline networks” had been “surrendered to vandals and illegal bunkerers”.

This unprofitable business climate has consequences and Avuru laid it bare with the revelation that because oil producers are forced to initiate “alternative evacuation” schemes costing them four to five times what pipeline export would normally cost, they are exiting the onshore/shallow water segment of the business entirely, with Shell and ExxonMobil as clear examples.

The significance of this disclosure is that the country, which is solely dependent on earnings from crude oil to fund its budget, is not raking in the kind of petrodollars it should be getting, even though it is meant to be a boom season for oil producers, courtesy of the West’s sanction on Russia over its invasion of Ukraine. This is a major contributor to the scarcity of dollars in the country and the significant weakening of the naira on the streets.

Before Elumelu’s outburst, residents of oil producing states, particularly those in Rivers state, have for months been calling on the government to shutdown the illegal refining of crude by thieves as soot enveloped the state’s skyline.

Also, warning that the theft of crude oil has crossed critical levels, Austin Avuru, the founding MD/CEO of Seplat Petroleum Development Company, the leading indigenous Nigeria oil and gas exploration and production company, called for the declaration of a national emergency in the oil and gas sector.

In a report titled, ‘Reining in the Collapse of the Nigerian Oil Industry’ and published by the Africa Oil + Gas report, Avuru admitted that as much as 80% of oil production never reaches the export terminals. The seriousness of the situation was brought to the fore when he declared that “the entire export pipeline networks” had been “surrendered to vandals and illegal bunkerers”.

This unprofitable business climate has consequences and Avuru laid it bare with the revelation that because oil producers are forced to initiate “alternative evacuation” schemes costing them four to five times what pipeline export would normally cost, they are exiting the onshore/shallow water segment of the business entirely, with Shell and ExxonMobil as clear examples.

Another cognate example is the experience of Aiteo Eastern Exploration and Production Company (AEEPCO), operators of the Nembe Creek Trunk Line (NCTL) pipeline. The company, faced with the troubling incessant vandalism, perennial sabotage and outright theft, threatened to exit the facility completely, citing “the activities of economic saboteurs whose audacity continues to be growing by the day.”

All of these are part of the reason why, though claiming to have a maximum crude oil production capacity of 2.5 million barrels per day, which ranks her as Africa’s largest producer of oil and the sixth largest oil producing country in the world, Nigeria is unable to fulfill its 1.7m barrels per day OPEC quota.

The Nigerian economy is hemorrhaging gravely because of this. The Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, at the March 21 media briefing held at the end of the second 2022 Monetary Policy Committee (MPC) meeting in Abuja, lamented the unprecedented rate of oil theft recorded in recent times and its debilitating effect on government revenue and accretion to reserves and limiting its ability to defend the naira.

The stance of the president of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Festus Osifo, was even more damning. Addressing the media in Lagos on March 24, Osifo held that “from October 2021 to February 2022, between 90 and 99% of the crude oil pumped into the

Trans National Pipeline (TNP) by operators was vandalized.”
He added, “Reconciliation/fiscalisation at Bonny terminal shows that between five and 10 percent of crude oil metered from the operators gets to the terminals.”

As a result, “Nigeria is losing close to 500,000 barrels of crude oil daily to theft and pipeline vandalism.”

The consequence of such brazen acts of thievery is far-reaching. Osifo noted that preliminary inspections recently revealed that about 150 illegal tapings were used in siphoning crude oil from the TNP. Operators injecting crude into the TNP have therefore been forced to suspend further injection, thereby shutting-in production.

Joint-venture oil companies like TOTAL Energies and SPDC, for example, stopped production into the TNP pipeline completely, while Agip ENI declared force majeure on their brass terminal.

Disturbed by these revelations, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) disclosed on March 22 that it had set up a team of experts to carry out a thorough audit of the activities of operators in the upstream petroleum industry in the last two years, in a move to ascertain the actual volume of crude oil stolen by vandals and saboteurs.

According to the Nigeria Extractive Industries Transparency Initiative (NEITI), in its audit report made public in July 2021, which indicated that in 2019, Nigeria lost 42.25 million barrels of crude oil to thefts valued at $2.77 billion, much more than an investigative team from an arm of those involved in the sector is required to deal with this crisis.

It also goes beyond Avuru’s recommendation that the NNPC and regulators set up a “war room” strategy to deal with oil theft because the sheer brazen disposition of the thieves point to the complicity of those entrusted with the assets.

How about the oil theft that occurs daily at the export terminals involving export platform personnel with the connivance of unscrupulous oil agency regulators, who sign dubious paperwork and military personnel deployed to protect our waters? Or do these vessels used to transport stolen crude just disappear into the thin air? It is selfish and wicked for these unscrupulous Nigerians to continue to treat our commonwealth this way.

Our country is crumbling before our eyes and we must be patriotic enough to say enough is enough.
I strongly believe that crude oil theft and illegal bunkering in the country is now as lucrative and synonymous as cocaine production and trafficking is to Colombia. It will require a strong dedicated effort and ingenious leadership to curb it drastically. The first part of the solution to this crisis is the application of the rule of law.

Our laws for economic sabotage must be very effective in deterring these kinds of crime. We are infamous for being a lawless nation where no one is held accountable for their crimes, especially when they are rich or highly connected. This must change.

The buck stops at the table of President Muhammadu Buhari, who also doubles as minister of petroleum resources. Therefore, it will take inspired leadership from the very top, the willing participation of stakeholders, the improvement of other sectors of the economy, the establishment of regulated and licensed modular refineries, the no-nonsense deterrent prosecution of all those found to be complicit in the criminality and a hard-nosed resolve to end this malaise backed by action for it to end.

But do we have such leadership?

THEWILL