Oil: The conspiracy that robs Nigeria of billions of dollars

Drums used for oil theft25 August 2013, Warri/Yenagoa/Port Harcourt – Nigeria is in dire straits. This statement summarizes the response of a top security official familiar with the large scale theft of crude oil that is going on at the nation’s oil terminals and as well as other locations en-route.

The security official fingered highly-placed individuals in a conspiracy that deprives Nigeria of billions of dollars in revenue to the Federation Account. “There is more to what you want to know from me. The truth is that it is a high technology crime and there is a well-built cartel responsible for oil theft in the country and, until you smash their set-up, illegal oil bunkering will not stop,” the security official told Sunday Vanguard in Yenagoa, Bayelsa State capital, last week.

He added, “They (the cartel) are highly connected people in and outside government, oil companies, businessmen, retired and serving military officers, including people you never thought could be involved.

“Illegal oil bunkering is their means of livelihood and they are bleeding the country. Forget about those you people in the media refer to as oil thieves. I mean those that steal crude oil from well heads with Cotonou boats/canoes, and then hide in the bush to refine and sell to petrol station owners.

“Those are people in the kindergarten section of the business. The main people are the ones you do not see. They do not come to the pipeline to steal crude oil; they do their transaction at the various oil terminals. Whether Forcados or Bonny (terminals), officials can declare that only two vessels were loaded when 10 were loaded.

“The oil barons are very wealthy and they mop up the little that oil bunkers are able to steal and sell to them, but they do their real business with oil companies and government officials.

Appearing perplexed about the situation, he asked rhetorically, “Do you think anybody will be complaining of stealing of crude oil if it is just the volume that villagers steal and refine to eke a living?”

How they operate
If the unnamed security official was hard to pin down, the president of the Ijaw People’s Development Initiative, IPDI, Warri, Comrade Austin Ozobo, was straightforward.

He explained, “The oil cartel has illegal points where they siphon oil through long hoses into their waiting boats with an understanding with military officials.

“The poor class, who were doing the business to earn a living, have long, quit the business because of the manhunt by security agents, who have continuously destroyed their properties, as they could not afford huge amounts to settle the security agents on daily basis”.

According to him, “Military men see the business as a money-making venture. They lobby to be posted to the Niger-Delta area because they know whoever serves in the creeks of the region must buy expensive cars and build big houses.

“Oil cartels lobby military men in oil installations to enable them load raw crude from points and to refine. Sometimes, they pay between N100,000 and N200,000 for loading per boat and local refinery operators settle military men in their operational areas with between one and two million naira per week.

“Most of the military men, government officials and oil company workers have big vessels, Cotonou boats, barges, local refinery ports and illegal points allocated to individuals to steal oil and make huge amounts of money. “The military men are selective in their operations. They only go after people who refuse to settle them”.

Kuku’s alarm
Special Adviser to the President on Niger Delta and Chairman of the Presidential Amnesty Office, PAP, Mr. Kingsley Kuku, raised eyebrows over the theft of the nation’s crude oil by an unidentified cartel, urging Nigerians to view it as a war against the country.

Giving his position and privileged sources, Kuku, who spoke while playing host to national executives of the Petroleum and Natural Gas Senior Staff Association, led by its vice president, Mr. Adamu Umoru, should know what he was talking about. He warned that unless decisive steps were taken to arrest the ugly trend, the theft could cripple the economy.

He noted that the volume of crude stolen could only be compared to the loss experienced at the peak of insurgency in the Niger Delta, warning that the theft could rise from 400,000 barrels per day to between 800,000 and one million.

His words, “The theft of our oil should only be equated with the ‘Blood Diamonds’ in Sierra Leone. This is the greatest act of sabotage against the Nigerian economy.”

Kuku, earlier in an interview with State House Correspondents, in July, accused the international oil companies (IOCs), some of their indigenous staff and some oil-bearing communities of complicity in oil theft.

According to him, the process of illegally extracting crude oil from pipelines in the coastal areas requires highly technical and mechanical expertise, which ordinary Nigerians or residents of the oil-producing communities do not have. However, he absolved Niger Delta governors of complicity in the crude theft, saying there was no evidence of their involvement.

He insisted that oil theft was an international crime and urged the international community to go beyond coming up with penalising oil theft, and support the efforts of governments across the Gulf of Guinea and other parts of the region in dealing with it.

He said, “The best you can find at the level of the Niger Delta people or some merchants of this trade are those doing menial jobs in it.

“You will need high-grade vessels and, where you cannot load your illegal or stolen oil, you are definitely going to find yourself in a mess where you will have to pay huge sums for demurrage. How many Nigerians have the capacity to do that?

“So it is an international crime. I have never heard about any governor being involved. I know of one thing and, this is the bombshell, that there are workers in the oil and gas industry who have the expertise, who have the technical know-how, who know about the ways and means of sabotaging the oil and gas industry, who are likely to be involved.

“I also know and this is critical and I know that a lot of multinationals will be angered by this, but their being angry does not bother me; what bothers me is the oil theft that is affecting the revenue of this country; that is affecting the environment that I am from.

“So you have a situation where some pipeline protection contractors empowered by the oil companies participate in the theft. This is not about NNPC; not about PPMC. You know almost every oil company has pipeline protection contract, pipeline surveillance contract for local security contractors.

“The same people who are meant to be securing these pipelines participate in oil theft. So the oil multinationals must look inwards at their contracting process, their procurement process, look at the status of some of their vendors and security contractors, x-ray them, review their processes very well and deal with the issue of oil theft as it affects participation in-house in the oil and gas industry”

Sharp drop in revenue
The impact of oil theft in recent times has been so devastating that oil giants, Shell and Agip, were losing 190,000 barrels of crude daily from oil fields in Southern Bayelsa State.

The decline was responsible for the drop in oil revenue accruable to the state from N12.4billion in May to N9billion in June, according to figures from the monthly revenue breakdown, echoed by Seriake Dickson, the governor of the state. It also forced the two oil firms to declare force majeure on their crude output from their facilities domiciled in Bayelsa to absolve them of liabilities from crude buyers.

Force majeure is a legal notice that absolves an oil firm of liabilities for failure to meet supply obligations to crude buyers due to circumstances beyond the firm’s control.

The Minister of Finance, Dr. Ngozi Okonjo-Iweala, recently, lamented that the country was losing 400,000 barrels of crude oil per day because of crude theft, illegal bunkering, vandalism of infrastructure and halt in production.

In addition, the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, said Nigeria might not recover from the negative impact of crude theft and pipeline vandalism in the next 20 years or more. Alison-Madueke stated that the nation was producing 2.3 million barrels of crude oil per day as against its daily production benchmark of 2.567mbd in the 2013 budget.

Analysing the impact of the 400,000bpd loss on the economy, a renowned economist and Chief Executive, Financial Derivatives Company, Mr. Bismark Rewane, said, “If you are doing two million barrels per day, multiply it by the cost of a barrel and you will understand what the country makes or loses. The 400,000 barrels is about 20 per cent of our total production. So, if your salary is reduced by 20 per cent, what impact will that have on you? Therefore, it is a very grave situation for the country”.

Unidentified cartel
Ex-militant leader and founder of the non-operational Movement for the Emancipation of the Niger-Delta, MEND, High Chief Government Ekpemupolo, alias Tompolo, revealed, in an interview, that a brawny cartel was behind oil theft in the country.

On whom they are and how they could be exposed, he said, “The identity of those responsible for the theft of crude oil could only be revealed through a high-powered investigation because it is a big business for the rich.”

Tompolo is the chairman of Oil Facility Surveillance Limited, OFSL, Warri, Delta State, an indigenous company that was contracted for a pipeline surveillance contract by the Nigeria National Petroleum Corporation, NNPC, to protect crude oil pipelines in Delta State. The contract, a pilot project awarded February 2011, expired in February 2012 and is yet to be renewed.

Control measures
Investigations carried out y Sunday Vanguard concluded that the fact that a cartel, comprising oil companies, security agents, government officials and wealthy Nigerians, are ripping off the nation, is not in doubt.

What is troubling, however, is the lack of foolproof measures to monitor pipelines, absence of up-to-the-minute technology to determine the actual oil production and the tepid attitude to the policing of the pipelines.

Oil companies also cry
Before Kuku raised the latest alarm, Shell Petroleum Development Company, SPDC, blew the whistle on behalf of the oil companies, sometime in June.

The company’s Manager, Government, Community Relations, Mr. Krukrubo Evans; General Manager, Nigeria Content Development, Mr. Igo Weli; and Head, Oil Spill Response, Mr. Pat Agbo, who spoke in Yenagoa, Bayelsa State, warned that the negative impact of pipeline vandalisation, oil theft and illegal refineries could affect Nigeria’s economy and environment.

Evans, who was represented by Mr. Funkakpo Fufyin, lamented that the activities of oil thieves had forced the SPDC to close oil production in its Nembe Creek Trunk Line in the state.

He said the shutdown of the facility led to the loss of 150,000 barrels of oil per day, adding that the development reduced the revenue accruing to the derivation account.

Prior to the shutdown, he said the SPDC discovered over 90 different punctured points on the 90km pipeline, adding that the company had commenced repairs of the trunk line.

“Our biggest worries are crude oil theft and illegal refineries. They are bringing down the economy. Nigeria loses 150,000 barrels per day amounting to $6.1bn annually to oil theft,” the SDPC Manager said.

“Illegal refineries are destroying our environment. We are pushing and talking to the government and other stakeholders to do something about it. These crude theft and illegal refineries have to stop”

He decried the mode of operation of illegal refineries and said operators only took 30 per cent of the crude oil products and “pour the rest into the environment.”

The official identified the company’s facilities in Bodo West, Imo River, Nembe Creek Trunk Line, coastlines offshore Niger Delta as the hot spots for illegal bunkering, adding that the oil company had taken measures to stop oil theft by monitoring its pipeline through detective equipment and aerial surveillance.

Govs intervention, by Uduaghan
Fielding questions from reporters, penultimate Sunday night, in Abuja at the venue of the Nigeria Governors Forum meeting, Delta State governor, Dr. Emmanuel Uduaghan, said the Forum was determined to check the challenge of oil theft in the country and had already taken measures to support the Federal Government, which were already paying off.

According to him, the Forum had to do something after the shutdown of two major pipelines (Trans-Niger and Nembe), which led to the combined loss of about 300,000 barrels per day.

“This resulted in the drop of our oil output from 2.5million bpd to 2.1million bpd. But, as I speak today, the two pipelines vandalized and damaged have been repaired and re-opened”, he stated. Uduaghan said that the cooperation and vigilance of all Nigerians was necessary to check illegal oil bunkering.

Hullabaloo over lost barrels
The point of the biggest controversy over oil theft is the actual loss figure. Nigerian National Petroleum Corporation, NNPC, disagreed with the claim that Shell lost $700 million to oil theft in the second quarter of the year.

NNPC, in a statement by its Acting Group General Manager, Public Affairs Division, Ms. Tumini Green, in Abuja, described Shell’s claim as “defective”, pointing out that the loss the multinational oil firm claimed to have suffered was not based on its operations in Nigeria.

It said the country was winning the war against oil theft and pipeline vandalism. Consequently, the corporation disclosed that daily crude oil production had increased to an average of 2.4 million pbd.

It said: “Suffice it to say that some vandalised pipelines and flow stations have been repaired and re-opened such that average current national daily production stands at 2.4 m/bpd compared to the average year to date figure of 2.13 m/bpd as at June 2013.” The corporation traced the success to the Petroleum Minister’s directive to NNPC to constitute an industry-wide committee on Security Strategy Against Crude Oil and Product Theft.

That committee’s members include representatives from NNPC, all IOCs, NPDC, security agencies and Oil Producers Trade Section, OPTS, of the Lagos Chambers of Commerce and Industry, LCCI.

– Emma Amaize, Samuel Oyadongha and Jimitota Onoyume, Vanguard

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