BY: PROF. MIKE A. A. OZEKHOME, SAN, CON , OFR, FCIArb, LL.M, Ph.D, LL.D, D.Litt, D.SC, DA, DHL
INTRODUCTION
We commenced this series last week with a detailed introduction of the subject matter, later we took a look at the history of oil exploration in Nigeria, where oil theft is carried out in Nigeria and those involved in oil theft in Nigeria. Today, we shall continue to x-ray the involvement of the military and other security forces, resident oil companies and the local populace. We shall also try to find out why and how oil theft is being carried out and later the cost of oil theft in Nigeria. Please read on.
MILITARY AND OTHER SECURITY FORCES (CONTINUES)
MILITANT ORGANIZATIONS
According to former Nigerian president Olusegun Obasanjo, militant organizations have often been used by “political godfathers” in the oil sector regions to cause disturbances in regional stability. These ales the whole process to enjoy less supervision by the government. This is disturbing, and considering the poverty rate of citizens according to the World Bank Index, joining any of these groups would mean a breakthrough and great deal as the reward is juicy. These groups primarily serve as armed escorts for the property of the political elite or function as the sabotage mechanism that is necessary for cold-tapping operations.
Due to the large success of the Niger Delta militant operations, Nigeria’s annual output of crude oil decreased from its potential capacity of 2.2 million barrels per day to 1.4. As a consequence of the high influx of oil pipeline sabotage in the Niger Delta, oil spills “devastated mangroves, contaminated soil and groundwater, destroyed the fish habitat, and posed a serious threat to public health.” Buhari failed in his fight against corruption, it was a selective fight.
RESIDENT OIL COMPANIES
Resident oil companies have also been fully involved in oil theft. The means of oil theft – hot and cold tapping – being very complex and dangerous, demands expert knowledge to implement same successfully. Resident oil authorities from multinational oil corporation stationed in oil sectors regions of Nigeria play key roles in facilitating this theft. In addition to providing technical expertise and managing oil withdrawal operations, oil experts offer inside knowledge on the schedule of corporate inspection operations on the pipelines. This is critical for ensuring that illegal secondary pipelines stay intact and that the location of fueling operations are not revealed to Nigerian security forces and multinational corporate authorities.
THE LOCAL POPULACE
It is pitiable and regrettable that the local populace that surrounds the variety of oil pipelines throughout Nigeria often facilitates the local creation and sale of illegally refined oil products as means of alleviating their impoverished condition. Same unscrupulous citizens make use of small-scale oil tapping to collect crude products. Their methods of extraction have contributed largely to pollution in Nigeria. This is due to their lack of technical expertise. In addition to oil pipeline leakages from small-scale tapping, the JTF’s anti-refinery and illegal oil market operations have led to uncontrolled destruction of illegal crude oil reserves. Due to the simple construction of bush refineries and their placement in isolated locations, all efforts by the JTF to mitigate the illegal refinement of oil products have largely been futile. In September 2018, the unemployment rate in Nigeria had reached 23%.
Consequently, in tandem with the high unemployment rate, the pollution of waterways and the contamination of local fish populations forced many young Nigerians to partake in oil theft and illegal refinery activities.
WHY DO THEY STEAL NIGERIA BLIND?
The why of oil theft is so elementary that it can be excused for – why do people steal? The answer is obvious. Theft generally may be as a result of lust, greed, avarice, wickedness, etc. People engage in stealing for diverse reasons. It may even be retaliation or set up. But as regards oil theft, a theft that involves so much expenses to embark on, a theft that involves the conglomeration of human and mechanical know-how, why would a wealthy man invest in oil theft? The reasons may not be farfetched. It may be for increase of wealth; control of economic power; societal recognition; etc. But have you ever thought that, it may be for “political power”? Some of the moguls involve in oil theft do that for political power and protection; and to get international illegal gains. Religious and ethnic sentiments may also be a reason for oil theft; but this is a different and more advanced rationale.
HOW IS THE OIL THEFT CARRIED OUT?
There are different means and methods of oil theft. There are both simple and sophisticated means, but for purposes of this discourse, we shall consider hot tapping, cold tapping and terminal and transportation theft.
Hot-tapping and cold-tapping are extremely sophisticated methods of oil theft and are primarily used in large-scale operations during the crude oil stage. Terminal and vehicle transportation theft involves the re-appropriation of both crude and refined oil products from storage facilities during the process of export transportation.
According to Mr. Mele Kyari, the Group Managing Director (GMD) of NNPCL, the illegal pipeline taps are so sophisticated now that in some cases, they run for 3-4 kilometers and would have involved cranes, and at least 40 workers to build. In fact, to your dismay, an illegal line alone which measures less than 200km, had not less than 295 illegal connections. He also revealed that the rate of theft forced the shutdown of two production fields.
Let’s proceed with the discourse.
HOT – TAPPING
Hot – tapping involved the attachment of an illegal secondary pipeline belonging to oil theft criminals to a high-pressure primary pipeline belonging to a multinational corporation. Thereafter, oil is diverted from the pipeline into to mobile oil bunkering facilities that are attached to the secondary pipeline. This process is normally difficult to discover because, the gradual withdrawal of small amounts of the oil normalizes the high-pressure from the primary pipeline. The process although gradual, is capable of withdrawing oil to fill thousands of metric tons in few hours. The process is very complex and dangerous, and has led to many disastrous events.
COLD TAPPING
Here, a portion of a pipeline is blown up, then a secondary pipeline is attached to the shut-down primary pipeline. It is also difficult to discover this kind of tapping, because, after the primary pipeline is repaired, the flow and pressure still remains same. This process is less dangerous.
TERMINAL AND VIHECULAR TRANSPORTION THEFT
Oil theft is common in the production states. However, it is easier and more rampant at port terminals. Transportation of crude oil at terminals awaiting shipments to international locations are met with serious diversion. During this process, siphoning is facilitated by the corporation of administrators and security agencies. There are reserved into criminal fuel trucks, and then, the trucks are used to transport illegal oil products for sales in neighboring African countries where prices are higher with or without subsidy. The lack of oil meters at the source of production and physical presence only at export facilities by oil corporations, is a lacuna, and thus disrupts the oversights in managing and accounting for the initial value of oil produce an – initio.
THE HUGE COST OF OIL THEFT IN NIGERIA.
In the third quarter of 2022, operators of the Trans Niger pipeline and the Forcados export terminal closed their facilities for repairs. The closures triggered a sharp drop in Nigeria’s crude oil output from 1.1 million barrels per day (b/d) in the second quarter to below 1 million b/d in the third quarter. Nigeria’s production recovered by the beginning of 2023; but an oil workers’ strike disrupted production again in April, 2023. Crude oil production in Nigeria fell to slightly more than 1 million b/d in April of this year, dropping below Angola’s production, which was estimated at 1.1 million b/d that month.
Nigeria lost about 13.21 million barrels of crude oil with an estimated worth of N603.64bn between January and August this year, an analysis of the monthly reports of the country’s crude oil and condensate production showed.
Against the 1.69 million barrels per day oil production benchmark in the 2023 budget, Nigeria recorded an output deficit of about 23.7 million barrels of crude oil production in January and February 2023, valued at about N920 billion at the official exchange rate of N460/$; and about # 1.840 Trillion at the black market rate.
According to an analysis of the data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in August, Nigeria’s total oil production shortfall hit 94.5 million barrels in the first half of 2023. When converted to money, the output slump would be an estimated gross revenue loss of $7.1 billion at an average oil price of $75 per barrel during the period between January to June this year.
Nigeria is at the moment, desperately in need of foreign exchange as currently reflected in the weakening value of the naira to the dollar and inability of foreign investors, especially airlines to repatriate funds to their countries of origin.
Few weeks ago, OPEC slashed Nigeria’s production baseline to 1.38 million barrels per day for 2024, due to the prolonged inability of the country to consistently meet its quota for the commodity. And, Nigeria gets over 90 per cent of its foreign exchange earnings from the export of the commodity. (To be continued).
THOUGHT FOR THE WEEK
“A century ago, petroleum – what we call oil – was just an obscure commodity; today it is almost as vital to human existence as water”. (James Buchan).
LAST LINE
God bless my numerous global readers for always keeping faith with the Sunday Sermon on the Mount of the Nigerian Project, by humble me, Prof Mike Ozekhome, SAN, CON, OFR, FCIArb., LL.M, Ph.D, LL.D, D.Litt, D.Sc. kindly, come with me to next week’s exciting dissertation.