A Review of the Nigerian Energy Industry

‘Nigeria can produce 4 million barrels of oil a day’

22 February 2012, Sweetcrude, ABUJA – Nigeria could produce as much as 4 million barrels of oil a day, according to a top Royal Dutch Shell official, Ian Craig.

But, Craig, who is Shell’s executive vice president, said this would be possible if the chronic problems with the nation’s government and the rampant theft of crude from pipelines are addressed.

“The militancy which crippled onshore production from 2005 to 2009 has abated, but staggering levels of theft and criminality prevail,” Craig said Tuesday in Nigeria’s capital, Abuja.

Nigeria, an Organisationof Petroleum Exporting Countries (OPEC) member, now pumps out about 2.4 million barrels of oil a day, making it Africa’s biggest producer.

Production dropped drastically during the militant attacks that targeted pipelines and saw foreign workers kidnapped. A 2009 government amnesty programme saw many fighters lay down their arms and the violence largely stop.

Craig stated that in place of attacks, thefts from pipelines have grown. The thefts, known locally as bunkering, see thieves use hacksaws and drills to cut into pipelines, where they attach their own spigots to steal the crude. That crude later gets sold into the black market or cooked into crude gasoline or diesel at makeshift refineries that dot the Niger Delta, a maze of creeks and swamps about the size of Portugal.

On one line recently depressurised, Shell found more than “50 bunkering points … and associated industrial scale illegal refining with major environmental impacts,” Craig said.

“The greatest challenge … is the massive organised oil theft business and the criminality and corruption which it fosters,” he said.

The bunkering likely continues because government and military leaders personally benefit from the theft. A U.S. diplomatic cable leaked last year quoted a Nigerian official saying that politicians, retired admirals and generals and the country’s elite are all part of the illegal business.

Craig also said production remained low as the government provided “chronic underfunding” of projects through the state-run Nigerian National Petroleum Corporation, which partners with foreign oil firms working in the nation.

Despite decades as an oil producing country, the majority of those living in Nigeria’s Niger Delta have seen only pollution and unyielding poverty as corrupt military rulers and politicians embezzle much of the country’s wealth. That anger that fueled the region’s militancy remains strong today.

Many activists blame Shell for funding part of that corruption while allowing the delta to remain polluted. Some environmentalists say as much as 550 million gallons of oil poured into the delta during Shell’s roughly 50 years of production in Nigeria — a rate roughly comparable to one Exxon Valdez disaster per year.

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