Proffering solutions to crude oil theft

17 August 2013, Lagos – Two weeks ago, the media was awash with reports on crude oil theft which has assumed an unprecedented dimension in recent times and has continued to impact very negatively on the potentiality of the nation’s oil and gas industry as a major revenue-earner for the country.

First, it was the report of an audit by the Nigeria Extractive Industries Transparency Initiative, NEITI, which revealed that over 136 million barrels of crude oil, worth an estimated $10.9 billion, were lost to theft between 2009 and 2011.

The loss represents 7.7 percent of the total revenue which accrued to the federation in the audit period. It was in addition to a loss of about 10 million barrels valued at $894 million as a result of pipeline vandalism in downstream operations.

At the Nigerian Annual International Conference and Exhibition held last week, Shell said over 60,000 barrels of crude were being stolen from SPDC lines every day, adding that the impact of the activities of crude oil thieves and illegal refineries on the environment in the Niger Delta and the Nigerian economy is now a crisis situation.

The company said Nigeria, which depends on the oil industry for approximately 95 percent of export earnings and 80 percent of government revenue, would not realise its aspirations to increase oil production to four million barrels per day (bpd) and reserves to 40 million barrels if the crisis remains unresolved.

Mutiu Sunmonu, managing director, Shell Petroleum Development Company, and country chair of Shell companies in Nigeria, noted that the scale and complexity of this problem is beyond the control of any one company. “Personally, I believe the perpetrators of these crimes need to be arrested and prosecuted. Until there is a deterrent, the industry does not stand a chance against illegal bunkering of the scale we are seeing today,” Sunmonu said.

Oil giant Royal Dutch Shell, in its second quarter 2013 results, revealed that the surge in crude theft in Nigeria contributed to the decline in its profits, which dropped by 20 percent to $4.6 billion from $5.7 billion a year earlier. Italian oil major Eni SpA also reported a 55 percent plunge in its net profit in the quarter, partly due to disruptions in Nigeria.
Analysts have said that the oil and gas industry will not make significant progress except the menace of crude oil theft and illegal oil refining are tackled decisively and promptly, stressing the need for government and its relevant agencies to muster more political will.

According to Anthony Ogbuigwe, group executive director, Refineries and Petrochemicals, Nigerian National Petroleum Corporation (NNPC), there is need for the government to develop a national plan for the protection of critical assets and declare pipelines as national critical assets. “Oil pipelines, over the years, have been the favoured target of vandals who steal crude oil.

– Femi Asu, Business Day

About the Author