A Review of the Nigerian Energy Industry

Stolen Nigerian crude trades at $68.84 per barrel

Diezani Alison-MaduekeHector Igbikiowubo 14 August 2013, Sweetcrude, Lagos –
*540,000 barrel goes missing daily
*Presidency, Labour trade blame
*Russians, Chinese accused of hot-tapping
*Shell JV worst hit
*Nigeria could lose $12bn yearly

NIGERIA’S Bonny Light stolen and traded openly on the West Coast fetches upward of $68.84 per barrel, investigations have revealed.

SweetcrudeReports went undercover, posing as a prospective buyer and was offered 70,000 metric tons (about 522,900 barrels) of Bonny Light at $36 million (about N5.76 billion), or $68.84 per barrel.

The seller offered to deliver the cargo to us offshore Cotonou and will accept either a bank guarantee or a letter of credit as payment.
The seller who disclosed he was acting on behalf of a cartel, assured that they could deliver same volume on a monthly basis.

Investigation revealed that although Dr. Ngozi Okonjo Iweala, Nigeria’s minister of finance, claims the country loses over 400,000 barrels of crude oil per day to theft; the figure is actually 540,000 per day.

Presidency, Labour trade blame
Ranking personnel of the Nigerian National Petroleum Corporation, NNPC alleged that the volume involved cannot be lifted without the active connivance of top government officials, from the Presidency to the Ministry of Petroleum Resources.
However, the Presidency has also accused oil workers of being the brains behind the alarming volume of theft recorded each day.

A statement credited to Mr. Kingsley Kuku, the Special Adviser to President Goodluck Jonathan on Niger Delta Affairs, published in a national daily on 17th July 2013 titled: “Oil Workers are the Ones Stealing Crude Oil,” pointedly fingered oil workers.

In its reaction, oil workers under the aegis of the National Union of Petroleum and Natural Gas Workers, NUPENG, and Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, dismissed the accusation, describing it as unimaginable, unguided, mischievous and condemnable.

The oil workers alleged that crude oil theft was being perpetrated by highly placed and influential individuals and politicians, noting that the presidential adviser “is only being economical with the truth and trying to cover up with his allegation against the workers.”

The oil workers noted that the volume recorded as loss each day (over 400,000 barrels) was too much to go missing without the active connivance and approval of the presidency and the ministry of petroleum resources.

“Has it occurred to you that over 400,000 barrels per day amounts to about $40 million per day and that a small barge cannot be used to move such volume? The brains behind this monumental scam must have the active connivance of not just the petroleum ministry but reach as far as the presidency.

“We gathered that the missing crude is being used to raise funds to prosecute the 2015 presidential election. Please, contact the ministry and the presidency for their reaction”.

We sent text messages to both Mr. Kevin Alonzo, a personal assistant of the minister of petroleum resources and Dr. Reuben Abati, the spokesman of President Jonathan, for a reaction to these allegations, but at the time of filing this report, we hadn’t received any feedback.

While reacting to a question on CNN regarding crude oil theft, on Sunday 21st July, President Jonathan had pleaded helplessness, telling the interviewer that Nigeria expected the world to assist. “If you people don’t buy, they (the thieves) won’t sell,” he had said.

Russians, Chinese accused of hot-tapping
Further checks revealed that both Chinese and Russian nationals who have perfected the art of ‘hot-tapping’ (breaking into flowing pipelines) are actively involved in the ongoing theft, with most volume of the suspected stolen crude finding its way to both countries and parts of the Far East.

Shell JV worst hit
While unveiling its second quarter results, Shell disclosed that higher costs and gas supply disruptions in Nigeria were major factors that made for “clearly disappointing” returns.

The Anglo-Dutch super-major reported net earnings taking a dive in the quarter, dropping 20% to $4.6 billion (on a current cost of supply basis).

Shell chief executive Peter Voser said exploration charges and adverse currency exchange rate effects also hit the company’s bottom line.

“These results were undermined by a number of factors – but they were clearly disappointing for Shell,” he said in a statement.

Shell reported an after-tax negative impact of $450 million related to the impact of the weakening Australian dollar on a deferred tax liability and at least a $250 million impact from the deteriorating operating environment in Nigeria.

Voser said the oil theft and disruptions to gas supplies in the country could cost the Nigerian government $12 billion in lost revenues per year.

“We will play our part, but these are problems Shell cannot solve alone,” he said.

Shell to dispose of 4 more assets
In 2010 Shell sold some of its assets and is poised to dispose of four more oil blocks in Nigeria in its latest divestment drive.

“We have recently launched a strategic portfolio review onshore Nigeria and North America resources plays, which will lead to further focus and divestments, and we continue to shape the company for the future,” Peter Voser disclosed.

Reuters reports that the blocks to be disposed, includes OML 13 and 16 onshore Niger Delta and 71 and 72 located in shallow waters.

OML 13 covers a large area with big gas reserves, while OML 16 is a much smaller asset.

OML 72 has proven oil reserves estimated at 120 million barrels, while OML 71 has significantly lower reserves.

Shell currently operates these assets in a joint venture with the NNPC 55%, Shell 30%, Total 10% and Eni 5%.

– SweeetcrudeReports Exclusive

In this article

Join the Conversation