The Rising Menace of Oil Thieves ~ By Olusegun Adeniyi
With tension brewing between the United States and Iran following last week attack on a Saudi Arabian oil facility which removed as much as five percent of global supplies, there has been an unprecedented jump in the price of crude. With that, there is the temptation to believe Nigeria will benefit from the current ‘harvest’. But it is highly unlikely for two reasons.
One, whatever gain we make from an increase in the sale of crude, it will go to subsidy payments because the landing cost of imported fuel will also increase. Two, the real beneficiaries of whatever ‘windfall’ comes from this crisis are likely to be oil thieves.
Now that President Muhammadu Buhari has put the economy in focus by assembling a solid Advisory Council with tested (and respected) economists, I hope he will also shift on critical issues for which he has apparent ideological fixation.
Chair of the Council, Dr Doyin Salami, who incidentally served on Buhari’s transition team in 2015, told Financial Times in November 2016: “Those who have tried to convince [the president and his closest advisers] that free market solutions are in Nigeria’s best interest have not succeeded.” This is the first assignment for the Council.
For instance, while subsidy is not necessarily a bad idea, one targeted at consumption of a fleeting item is fraught with loopholes that are easily exploited to game the system, making little or no sense under our present circumstances. Palliative measures are necessary to cushion possible effects of fuel price adjustments for the poor, but the current regime is unsustainable. Lest I get ahead of myself, this is not a conversation for today.
As we therefore commend President Buhari for the choice of appointees who will advise him on the economy, we hope he will heed their counsel. We must also remind him of the urgent need to rejig our security apparatus. There is a growing threat not only to lives and livelihoods in Nigeria (with kidnappings now the biggest criminal enterprise), but also to our economic mainstay.
In a 5th June report titled, ‘Nigeria’s Oil Thieves Roar Back as Militants Kept in Check’, Bloomberg stated that “Oil theft is now an industry employing thousands in Nigeria.” What the report may not have said is that aside the money we are losing, there is a nexus between this organised crime and the influx of arms into our country that is empowering other criminal cartels.
What is even more instructive is that barely a month after that report (in July), the Nigeria Natural Resource Charter (NNRC) revealed that our country lost a whopping N1.6 trillion to oil theft in 2016 and N995 billion in 2017. That amounts to a combined loss of N2.6 trillion (about $7.2 billion) for the two years. And last month, (August), the Nigeria National Petroleum Corporation (NNPC) admitted that Nigeria lost as much as 22 million barrels of oil to theft in the first half of this year.
That also equates to more than 120,000 barrels per day (bpd), or roughly six percent of the national production output. Edo State Governor, Mr Godwin Obaseki, who chairs the ad-hoc Committee of the National Economic Council on Crude Oil Theft, Prevention and Control, predicted that the figure could in fact double by the end of the year if nothing is done to deal with the situation.
We must point out here that oil theft is not a new challenge in Nigeria; it has been with us for decades. In 2014, for instance, there were three public revelations on the malaise. In May of that year, the late former Bayelsa State Governor, Chief DSP Alamieyeseigha, testified before the Senate Committee on Public Finance and Revenue. At the hearing, Alamieyeseigha said:
“I had one experience. Tankers were loaded in Bayelsa. I got the information and laid ambush for them and arrested them. About 14 big tankers and they were handed over to the police. They were charged to court and the judge ordered that the product should be tested to be sure if they were crude oil. NNPC was invited, they came, took the sample and after a week the result came out as agro-chemical and before I know it, all of them had been released”.
The same month (May 2014), the then Nigerian Maritime Administration and Safety Agency (NIMASA) Director General, Mr. Patrick Akpobolokemi, said, “There are some big vessels under my custody belonging to organised piracy and crude oil thieves. Very soon, I will release all the big names in the syndicate.”
Till today Akpobolokemi has not revealed any name and we have no idea what has happened to those big vessels. In August of the same year (2014), the Wall Street Journal (WSJ) reported that the United States government had launched investigation into crude oil shipments from Saltpond platform, an oil facility off the coast of Ghana, that was shipping large quantities of crude from unknown sources to Europe and was uncovered in the course of a broader enquiry into how stolen oil from Nigeria was being sold to some international cartels.
According to the WSJ report, a Saltpond official reportedly testified that huge volumes of stolen crude were procured from some Economic and Financial Crimes Commission (EFCC) officials. The allegation was never investigated though the commission claimed at the time that it “is not an oil marketing company and could not have issued any invoice to any oil trader to lift confiscated crude oil from Nigeria.”
I am aware of current efforts to deal with this challenge. The Federal Executive Council recently approved the ‘Deep Blue Project’ to achieve four major objectives: prevention of illegal activities in the Nigerian Exclusive Economic Zone; enforcement of maritime regulations; enhancement of safety at sea and prevention of illegal activities in the Niger Delta back waters where most of the oil theft occurs.
It is to be funded by NIMASA but operationalized by the Nigerian military led by the Navy. With four components, the idea is to have a centralized integrated surveillance system that gives a bird eye view of the entire maritime area. This will necessitate the acquisition of patrolling assets (aircraft, helicopters, special mission vessels, interceptor vessels, armoured vehicles etc.). There is also a plan for a coast guard (intervention standing force).
Mallam Mele Kyari who assumed office as the NNPC Group Managing Director in July is putting out the figures and helping to create a culture of transparency in a notoriously opaque sector. But the security challenge is beyond him or that of the NIMASA boss, Dr Dakuku Peterside who has also been focused on the cabotage angle to the challenge.
While the ‘Deep Blue Project’ remains the most ambitious and coordinated solution to monitor and patrol the backwaters, the human element is critical to its success. That is where the security agencies, officials of oil companies and the Navy come in. If their personnel continue to be part of the criminal network, as has been the case over the years, the idea may be doomed to failure.
There are several categories to oil theft in the Niger Delta and numerous people are involved at all the levels. These include small scale theft at ruptured pipelines; large-scale illegal bunkering in the field; big volume theft at export terminals as well as piracy and oil tanker hijacking at sea.
What particularly worries is that oil thieves, like ‘ghost workers’, take a huge chunk of our annual wealth yet nobody is ever caught let alone punished for this monumental crime against our country. But that also speaks to the fact that those involved are the untouchables of our society.
Meanwhile, the NNPC Monthly Financial and Operations Report (MFOR) recently revealed about 75 per cent rise in cases of oil pipeline vandalism across its network of pipeline infrastructure. According to the report, from the 60 points vandalized in May, the figure of breached pipeline points had risen to 109 in June.
It is all the more instructive that the figures were given after a stakeholders meeting Kyari hosted with representatives of the Police, Navy, Army, Civil Defence, the International Oil Companies (IOCs), indigenous operators and a few Niger Delta governors.
I will not be surprised if some stakeholders present at that meeting were themselves big-time oil thieves. After all, it has been established that those involved in these criminal activities are unscrupulous employees of the IOC, retired and serving military and security personnel, officials of the NNPC, indigenous oil producers, top politicians and their enablers.
So pervasive is oil theft on our territorial waters that the Gulf of Guinea has become the most dangerous for shipping activities. “A tanker will be commandeered, its tracking devices disabled, and its cargo siphoned off onto a smaller ship in an isolated location and sold on the black market”, according to oilprice.com, an authoritative news outlet for oil and gas.
“Fuel theft in Nigeria is so systemic it will not be slowed or stopped any time soon. Doing so would be tantamount to eliminating drug trafficking in Colombia”, argued Dr Terry Hallmark, an Instructional Assistant Professor at Honors College, whose career in the international oil and gas industry as a political risk analyst spanned more than three decades, in a piece he wrote for Forbes magazine in 2017.
Last week, Kyari paid a courtesy visit to the Chief of Naval Staff, Vice Admiral Ibo Ekwe Ibas regarding how to tackle this growing menace. While the usual assurances were given, the most promising means of combating fuel theft, according to Hallmark, is fuel ‘marking’.
The idea, which has been around for a while, is that markers “allow stolen or diverted fuel to be identified and recovered, and perhaps more importantly, used as admissible scientific evidence to prosecute fuel thieves and smugglers in courts of law.” It is time we tried the idea.
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