From Uche Usim, Abuja
With a sovereign debt of N39.556 trillion amid growing crude oil theft and pipeline vandalism, investors say the Nigerian economy is on ventilators and may completely collapse, if pragmatic steps are not taken to ward off thieves and boost oil production.
These disruptions are succinctly described in some quarters as untreated national sores that have existed for decades, which continue to rob the Federal Government of much-needed revenue and worsen environmental pollution.
Crude oil theft recently assumed the worst dimension in Nigeria’s chequered history, with reports indicating that over 70 per cent of mined crude oil was lost to organised criminal gangs populated by the elite.
Tony Elumelu, the executive chairman of Transcorp Group and operator of Oil Prospecting Licence (OPL) 281, recently raised the flag that the frightening level of oil theft was convincing evidence that Nigeria can never meet its Organisation of Petroleum Exporting Countries (OPEC) production quota, since the bulk of the crude is usually stolen.
“There is no doubt that Nigeria will not reach its OPEC production quota unless it stops the stealing. Who is stealing crude oil? They are not everyday people. They are the elite of society, and we must fight them together,” he tweeted recently.
Also commenting on the horror, governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, at the last Monetary Policy Committee meeting, lamented the worsening oil theft and its destabilising effect on government revenue and accretion to reserves.
Governor Nyesom Wike of Rivers State openly accused the security agencies of being complicit in the menace, but his voice was hushed by the propaganda machinery of the political class.
However, operators insist that scrubbing off the culpability of security agencies in oil theft is the very reason it is blooming.
They said the network is so sophisticated that it cannot exist without the blessings of security agencies. This is because oil theft involves ferrying the product in barges that must be escorted by armed law enforcement agents to markets in the United States, West African nations, Brazil, China, Singapore, Thailand, Indonesia and the Balkans.
About 150,000 barrels of oil a day was stolen last year, costing the government $5 billion.
More so, a report released earlier this year during a meeting on crude oil theft between the Nigerian Upstream Petroleum Regulatory Commission and Oil Producers Trade Section, and the Independent Petroleum Producers Group showed that, from January 2021 to February 2022, Nigeria lost $3.2 billion to crude oil theft.
Group managing director of the Nigerian National Petroleum Company Limited (NNPC), Mr. Mele Kyari, described it as a national emergency on account of the proportion, dimension and sophistication it has taken in recent times.
According to him, Nigeria, as an oil-producing country, ought to be enjoying a windfall now with the sudden rise in the price of crude oil in the international market due to the Russia-Ukraine conflict, but it is not.
Before the Russia-Ukraine crisis, crude oil was selling at between $96 and $97 per barrel. It shot up to $105 per barrel the day after the conflict began. It has since then been hovering between $110 and $125 per barrel. Nigeria is not reaping as much as it should from this because it is not able to meet its OPEC production quota.
In fact, crude oil production has dropped to an all-time low of 1.29 million barrels per day (without condensate). The addition of condensate brings Nigeria’s production to 1.49mbpd.
A look at production figures from 2020 till date shows in stark relief how much of a monster the menace of crude oil theft has become. The average production in 2020 was at 1.77mbpd.
With 2020 was the year the dreaded COVID-19 pandemic almost brought the world to a halt with virtually every country on lockdown, the price of crude oil crashed to sub-zero levels with unprecedented demand dip. The development resulted in zero crude oil theft in Nigeria, obviously because there was no market for the thieves to sell their stolen crude. This saw the country recording its highest production level of 2.49mbpd on April 17, 2020.
According to Kyari, what that development showed was that Nigeria had the capacity to produce that figure (2.49mbpd) on any normal day because there was no special intervention of any kind that led to that peak production that day.
However, as normalcy returned and the price of oil began a steady rise, the oil thieves began to step up their game and upstream operators began to experience production losses, which have been growing in almost direct proportion to the rise in crude oil price in the international market.
Explaining the situation recently, the NNPC GMD said it got to a point where, if producers injected 239,000 barrels of crude oil into either of the Trans-Niger Pipeline or the Nembe Creek Trunk Line (some of the major pipelines that convey crude oil to the terminals for export), only 3,000 barrels would be received. It got to a point where it was no longer economically sustainable to pump crude into the lines and a force majeure was declared.
In 2021, a similar trend was observed. In January that year, out of about 239,000bpd pumped into the line, only 190,000bpd was recovered, putting the loss at 19,000bpd.
The rate of oil theft kept increasing as the price of crude oil rose in the market, until March 2022 when there was zero recovery from all the volumes pumped into the line.
Another pattern in the trend of oil theft is that it is more endemic with joint venture assets and those that belong to the independents than with production sharing contracts assets. This is likely because of the nature of the JV assets, which are mainly onshore or in swamp/shallow waters. This makes the evacuation pipelines more accessible than those of the PSCs, which are offshore and in deep waters.
There is also a pattern in the way the theft is carried out. This can be discerned from the size of pipes inserted on the lines and the technology deployed in carrying out the insertion.
In some cases, the pipes inserted to steal crude oil from the lines are small and fitted in an amateurish way. This is an indication that those involved are small-time criminals, more likely artisanal refiners who operate the slew of illegal refineries that dot the creeks of the Niger Delta from Akwa Ibom to Rivers, and from Delta to Bayelsa.
Some of the pipes fitted into the lines to siphon crude oil are big. In some cases, they are of the same size as the pipeline or of the size used at the terminal to pump crude into vessels. A close look at them would show that they were professionally fitted with the use of cutting-edge technology. There have been cases where riser pipes were used, indicating that the criminals deployed cranes. These cases prove that the persons involved are not the regular illegal refinery operators but sophisticated and very knowledgeable criminals with access to vessels through which they ship the stolen crude oil out of the country.
The involvement of this last group is what accounts for the high volumes involved in the theft, which has become an existential economic threat to the oil and gas industry and Nigeria as a nation.
On the other hand, artisanal refiners and their illegal refineries have constituted a very grave danger to the environment and people of the host communities through the heavy pollution caused by their activities. This is beginning to cause soot in the atmosphere and health challenges in some communities.
In terms of the financial losses to the nation, in 2021, the total volume of crude oil stolen was put at 200,000 barrel per day. At an average price of $55 per barrel, the total loss came to about $4bn (from January to December 2021).
In 2022, between January and April alone, the volume of crude stolen has risen to about 250,000 barrels per day, putting the total loss at about $1.5bn (at the rate of $100 per barrel).
Another way to look at the virulent nature of the crime is to look at the rate at which the crude pipelines are breached with insertions. On a stretch of 20 kilometres of pipelines, there were 85 insertion points in three weeks!
The Trans-Forcados Pipeline, which is about the most reliable of all the land lines, is not spared. It records about 19,000bpd loss daily.
There are also cases of sheer vandalism where the lines are just blown out with explosives resulting in spillages and environmental hazards.
Yet, another area where oil theft is affecting the economy is the area of investment. It has slowed down the gains the Petroleum Inductry Act (PIA) was supposed to bring about in the area of investment. Potential investors now ask how they can recoup their investment when crude oil is stolen.
With the twin menace of oil theft and pipeline vandalism assuming epidemic proportion, the President has given marching orders to the Chief of Defense Staff to lead a war against the criminals. All the security agencies have been mobilized to flush out the criminal elements and restore normalcy.
In fact, officials of the Department of State Security (DSS) and the Nigerian Navy have already made some arrests.
The NNPC has also deployed community-based security to monitor the pipelines while it is working on deploying technological tools for more effective surveillance and monitoring of the lines and facilities.
The Economic and Financial Crimes Commission (EFCC) and the Nigerian Financial Intelligence Unit (NFIU) are also tracking movement of funds relating to the criminality.
While there is hope that all the measures that have been deployed so far will begin to yield results within the next two months, it must be pointed out that oil theft and pipeline vandalism are problems for everyone. Apart from the host communities that are directly affected by environmental degradation, every citizen suffers the loss of national revenue when the government does not have enough to provide social amenities and infrastructure to improve the quality of life in the country.
It is, therefore, imperative for all Nigerians to rise against those behind crude oil theft and pipeline vandalism with a view to stamping them out so that the oil and gas industry can yield the fulness of its benefit to the nation and the citizenry.
Pastor Enoch Adeboye, the General Overseer of the Redeemed Christian Church of God, had a rare outburst at a recent Sunday sermon when he spoke about the massive theft of crude in Nigeria’s Niger Delta, which has planted the country on the road to bankruptcy.
He inferred that the industry was currently in dire straits, stressing that efforts must be made to save it.
He said: “Who is stealing the oil? Where is the money going? What do they want to do with the money? Who are the foreign nations buying this stolen oil? How many of these nations of the world are your friends?
“We are borrowing more and according to a friend of mine, we are moving steadily towards a state of bankruptcy, a whole nation.”
For an economy already bogged down with corruption, opacity and environmental vandalism associated with its oil industry, leaving the issue untackled is akin to national suicide, especially when one reckons that the oil industry generates about two-thirds of Nigeria’s revenue.
Analysts say the issue must never be politicised if the country is to survive because it has reached a point where the monster is either killed or it kills the nation.
Already, oil theft has ruined all efforts by the NNPC to reduce the cost of oil production to about $10 per barrel as the current production cost is pegged at $32 a barrel.
Another player and founding Managing Director of Seplat Petroleum, Austin Avuru, in a recent report, warned that oil production in Nigeria was now in an emergency, critical state, due to oil theft.
In the report titled, “Reining in the collapse of the Nigerian oil industry,” Avuru disclosed that some oil producers no longer get to see as much as 80 per cent of their production making it to the terminals. He also urged the authorities to do something about the problem.
Meanwhile, sensing dangers ahead, amid louder calls for energy transition, International Oil Companies (IOCs), who built the infrastructure in which oil is mined, are quickening their exit, leaving the country vulnerable to a crippling energy crisis.
Investigation by Daily Sun reveals that private sector players with expertise on how to manage the imbroglio are not part of the solution crew the government has constituted to arrest the situation.
According to industry watchers, the solution to oil theft does not lie in excessively militarising the Niger Delta region, but by a tripartite agreement between the private sector players, government bodies (Ministry of Petroleum Resources and agencies) and the security and intelligence circle.