A Review of the Nigerian Energy Industry

How oil thieves, cabal milk Nigeria dry

Crude oil theft.
Crude oil theft.

27 July 2015, Abuja – Rampant stealing of petrol, mostly from along the pipes conveying it, costs Nigeria huge losses in financial terms and in impact on the environment

Okon Mbom (not his real name) wakes up 4.00am every morning from his house in Ibuluya, Okrika local government area of Rivers State with one thing in mind: nothing and no one will come between him and his take-home package every sunset when he is relieved.

Okon receives N10,000 every day from stern looking operatives of an oil pipeline in the deep forest. Okon of course had discovered with time that his paymasters were not government officials. Sometime last year when he was engaged, he was given strict instructions to shoot any stranger at sight.

Okon had known that what he was protecting was crude oil, Nigeria’s cash cow, used to be pumped by the same pipes to various oil refineries before now but which, since the breakdown of the refineries, has had to be pumped to various depots across Nigeria.

What Okon is guarding with his life is oil theft, a nefarious commercial craft associated with criminal gangs and militants tapping crude from pipelines for local refining and for exportation to foreign countries where it is sold illegally.

Oil theft in the Niger Delta is believed to exceed 180,000 barrels per day (bopd). The illicit trade involves the theft of crude oil and its derivative products through a variety of mechanisms with significant economic, social, environmental, governance and security implications which contribute to the poverty and degradation in the Niger Delta region of Nigeria.

Taking 180,000 bpd as they do, oil thieves in the Niger Delta constitute the 12th largest oil producing group in Africa and generate revenue that exceeds the GDP of 15 different African countries.

The oil haul could be more than 180,000 bpd, it could be less. Many individuals and institutions quote varied statistics, with no source appearing to be an authority on the true figures.

A former Chief of Naval Staff, Rear Admiral Usman Jibrin had disclosed that Nigeria loses about N1.18 billion to oil theft daily (100,000 barrels), leading to an estimated loss of about N433 billion to the country annually.

Jibrin, who spoke at the Senate when he appeared before the senators to defend the 2015 budget of the Navy before the Senate Committee on Defence (Navy), attributed the information to Chatham House’s recent disclosure.

By its own derivation, the London-based research group Chatham House believes “Oil is being stolen on an ‘industrial scale’ in Nigeria and the country’s politicians and security officials are among those profiting… ” Chatham House estimated that “an average of 100,000 barrels is stolen daily.”

The view expressed by the Navy boss contradicts the position of the Ministry of Finance which stated that about 400,000 barrels of crude oil is stolen per day. Nigeria’s former Coordinating Minister for the Economy/Finance Dr. Ngozi Okonjo- Iweala, speaking on the cost implication of oil theft on the economy, had said over 4,000 barrels of crude translating to N7 billion is lost daily to the activities of oil thieves.

A source at the NNPC who spoke in confidence, said: “The problem we have is the Kaduna refinery. The pipeline to the refinery is bad especially from Abaji to Kaduna. That axis has become vandals’ haven and if we go out there to say we are repairing it, the vandals will be on the flank to strike again. So we are not making noise about the project.”

The vandals attack this axis often and this stalls supply to Kaduna. The System 2C was attacked in August 2013 and the cost of the repair was estimated at N200 million.

Also the former Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke while giving account of her stewardship in a presentation at the 2013 Ministerial Platform held at the National Press Centre, Radio House, Abuja, agreed that the menace of crude oil theft was a challenge not only to the sector but to the nation’s economy.

But it is not just about losses in volume and financial terms. The evils of the malpractices transcend such obvious facts.

Crude oil theft and illegal refining are the main sources of pollution in the Niger Delta region today. Despite all efforts to curtail the activities of oil bunkering, the criminal economic activities persist.

How the fuel siphoning is done
The methods of siphoning both crude and refined products include using an engineering device/technique called HOT TAPP/Hot tapping machine.

No matter the pressure of the products flowing through the pipeline, hot tapping machine can be used to drill and clamp a valve or manifold on a pipeline without causing spill or explosions, through which you can create a diversion from the main pipeline.

Another method is using hand drills, cecile and soldering. The vandals construct points by drilling, hack sawing and soldering valves and manifolds on to the product pipelines. This is with connivance with the pumping station’s personnel. When pumping is stopped the vandals quickly install the valves and manifolds.

The “Cock and Shop” is a slow method of corroding the pipeline by using concentrated acid making contact onto the pipeline. When the pipeline is corroded they use a spike to burst the pipeline, which sometimes may result to explosion and fire.

Those involved in illegal oil bunkering said abject poverty got them into the illegal economic sabotage. A good number of locals residing in the coastal communities also operated illegal refineries in their communities to make ends meet.

One source who spoke with our reporter in Soku, Rivers State, said, “For many youths residing in most coastal communities, illegal refineries as a booming business. When we get the crude from ruptured pipelines we refine the products into finished products such as fuel and diesel which we sell to local buyers. It is a business that gives us money and with it, we make ends meet, but it’s unfortunate that we tap crude oil from pipes because it is very risky, and as I speak to you, I have stopped the business. The Joint Task Force in the Niger Delta (JTF) has destroyed so many local refineries and we have to do other things legitimate to survive.”

The source who pleaded anonymity, urged Federal and State governments to assist residents of rural communities, especially those living near pipelines, with jobs or other things that will keep them busy.

” It is indeed very risky operating illegal refineries,” he said.

Jamaica Belema is from Abonnmma in Asari-Torlu local government area of Rivers State. He told our reporter that he and some of his friends operated illegal refineries in his community and other “safe areas” where the JTF could not locate.

“We used crude implements like drums, firewood and stoves to refine crude oil. It was not easy. We made profit from our products. I cannot tell you how much we made, but we made money to make ends meet,” he said.

He said the JTF has destroyed their illegal refineries and added that they have stopped the business.

While the illegal oil business is still booming across Niger Delta region the Joint Military Task Force said it is making progress as it had destroyed several illegal refineries in Rivers, Bayelsa, Delta and Edo states.

The Commander of the JTF, Maj-Gen. Emmanuel Atewe, said the Task Force impounded 53 vessels, 200 barges, destroyed 840 illegal refineries, arrested more than 1,000 suspects in the fight against oil theft in 2014.

Atewe, however, regretted that slow judicial process was frustrating the efforts of the task force because suspects granted bail often returned to the crime and are re-arrested.

He said that JTF officers rejected a bribe offer of $65,000 from a suspect earlier arrested for stealing crude and arrested the culprit who was granted bail.

He said that the JTF under his command, observed that due to the relative ease of re-assembling the illegal refineries after destruction, force alone could not stop the menace.

According to the Commander, the JTF had adopted a ‘carrot and stick’ approach which involved advocacy and winning the heart of the residents of oil communities.

The joint task force recently inaugurated two water projects in Igbomatoru and Otuoke Communities in Bayelsa, as part of measure to win the support of residents who now provide vital information to it on activities of oil thieves.

Environmental Rights Action/Friends of the Earth Nigeria (ERA/FoEN), a non-governmental organisation, said it had begun consultations with communities in the Niger Delta area on how to stamp out oil theft and the operation of illegal refineries in the area.

Dr Godwin Ojo, a Director of the Rights Action, told reporters in Bayelsa State that oil theft and illegal refining of crude oil had become a major economic concern. He added, “Oil theft, in terms of illegal oil bunkering or bush artisan refineries, is fast becoming topical in Nigeria. It is a thing that is coming to the limelight; so, we want to promote discussions around this topic so that the government and stakeholders will find a lasting solution. From the law books and government’s perspective, oil theft in all its ramifications, borders on criminality and economic sabotage but here in the local communities, the perception is different altogether.”

Ojo said previous efforts to combat oil theft and illegal refining were unsuccessful because the communities were not involved in the campaign. “Our concern is that there is no discussion and the use of force will not necessarily stop these illegal practices. For example, the bush refinery has makeshift equipment and it is easy to be installed. If you destroy one refinery; in a few hours, another one is set up,” he said, offering a suggestion, “Therefore, we think that dialogue and getting to the root of the issue are central to solving the problem.”

Ebiowe Kemenai, a resident in Igbomatoru, a coastal settlement in Southern Ijaw Local Government Area of Bayelsa told journalists that the people resorted to buying products refined illegally due to non-availability of products from the formal channels. He said that it was absurd that hundreds of billions of naira was expended to subsidize the distribution of refined products but the oil communities are left out of the picture.

“For the Niger Delta oil communities it is simply a question of taking what we have to get what we need, it is extremely difficult even in normal situations when there is no fuel scarcity to get refined products from the official channels,” he said.

There is this weakness: since the manhunt for oil bunkers began by the federal government, no single person arrested has been prosecuted. Those arrested regain their freedom and find their way back to the creek to continue their activities, giving credence to the suggestion that those behind it have strong backings from the top.

The powers behind the thieves
In 2010, a United States diplomatic cable, WikiLeaks said that politicians and military leaders, not the militants were responsible for the majority of oil thefts in the country. The thefts, according to WikiLeaks, also fuelled arms sales to the fidget region while causing environmental damage and cutting production in a nation crucial at the time to US oil supplies, and specifically stated that retired admirals and generals and political elites were profiting from crude thefts.

Edwin Clark, a Federal Government delegate to the 2014 National Conference and the acclaimed political ‘godfather’ to former President Goodluck Jonathan, had accused top military personnel of involvement in illegal oil bunkering in the Niger Delta. The Ijaw leader who traced the trend to the early 1970s, said when he discovered it he quickly alerted the then president, Olusegun Obasanjo, who in turn directed General Theophilius Danjuma, who was the Minister of Defence at the time to investigate the issue, and that investigation revealed that military personnel were those behind the illicit oil bunkering.

He also alleged that some of the military officers linked to the distasteful act had been retired, while others were still in the service, and advised that to stem the tide, the troops in the Niger Delta should be changed from time to time, as doing so would go a long way to curtail the rate at which Nigeria’s oil was stolen.

Gbenga Taiwo, a Port Harcourt based oil and gas worker, said the Niger Delta youths only embark on ‘bucket bunkering’, which is on a small-scale because they do not possess the technology for big operation. According to him, efforts by the international community to assist Nigeria fight the decades-long problem had been frustrated by top military personnel and political allies of government who benefitted from the illicit oil business.

He said most of the stolen crude was pumped straight from the pipeline into barges which then transfer the valuable load to ships waiting offshore and which then head to refineries around the world.

“Nigerians must know that of a truth, the people involved in illegal oil bunkering are highly placed Nigerians with the support of their foreign partners. Oil bunkering is not a poor man’s job. It is a business of the elite who have the resources to engage experts in bunkering and soldiers, Navy, Air force, Police and other security personnel. They are the high and the mighty. No president, whether military or civilian has been able to touch them and sadly, Buhari may not be able to touch them. It is that bad”, he lamented.

Government opted to check activities of oil theft hitherto commonly associated with militia group from Niger Delta region and awarded security contract estimated at N17billion to some egg-heads of the ex-militant groups, which were hitherto seen as being the dominant oil pilfering, to protect the country’s pipeline against vandalisation as well as other activities oil thieves. Curiously, rather than the situation abating, it has rather assumed astronomical dimension.

Of course, it could only be the privileged elite of the society with influence in the corridors of powers, who in collaboration with security personnel would easily beat off efforts to checkmate their nefarious deeds. There are security surveillances of oil installations, but the elements are often at the beck and call of these influential persons who command enough political clout to thwart any attempt to unravel the mask behind the dirty game.

Little wonder, Mrs. Alison-Madueke in apparent declaration of government helplessness in handling oil theft referred to it as a ‘multifaceted and complex’.

According to her, “We are working in tandem with the security agencies, state governments and other agencies and stakeholders. Beyond that, Mr. President has also reached out to his counterparts internationally, with Presidents of countries across the globe. Some countries are beginning to ban the sale of Nigerian stolen crude. So we are working towards it internally and globally.”

Of course, without patronage the activities of oil theft would have fizzled out or greatly reduced. Therefore, boycott of illegal crude oil sold in the high sea by un-authorised elements is believed to have great potentials.

Few months ago, the Joint Task Force (JTF) Operation Pulo Shield destroyed 748 illegal refineries in the Niger Delta. Media Coordinator of the agency Lt. Col. Onyema Nwachukwu, who said 498 suspects involved in the illegal activity were arrested within four months, added that some 545 assorted boats, 26 barges and 18 vessels were also impounded that same period.

Still, many months after incidents of oil theft rather than abate has had added impetus forcing the government at every forum to cry out and plead for international and local assistance to put an end or reduce the scorch.

Failing efforts against oil bunkering
As part of effort to stem the tide , former President Goodluck Jonathan set up joint military taskforce codenamed Operation Polu Shield commanded by a top ranking Army General, but the illegal oil trade has continued.

In 2013 the Nigerian government estimated crude oil theft and associated production at over 300,000 barrels per day.

Shell Petroleum Development Company (SPDC), presently divesting its investment in the Nigerian oil sector because of the criminal activities of crude thieves, says in its quarterly journal that interference with pipeline and other infrastructure was responsible for about 75% of oil spill incidents while the total volume of spilled oil from its facilities between 2009 and 2013 stood at 92%. Greater volumes of oil are discharged into the environment away from the company’s facilities through illegal refining and transportation of stolen crude oil.

With the hue and cry over the menace of pipeline vandalism in Nigeria, a Kano-born engineer, Dr. Ado Abdu, Technical Director, Geological Drilling Investment Ltd. (later Acousto-Ultrasonic Integrity Energy Services Ltd.) has developed a system of detecting theft from oil pipeline installations in Nigeria.

Ado, a product of Bayero University Kano and Robert Gordon University in the UK, said, “I developed these systems out of patriotism. Initially my Phd research programme was supported by NASA to develop a system that can be used to detect defects on engineering materials, but NASA decided to deviate from it for military application. Because of this I decided to develop something that can contribute to solving one of our major problems which is oil and gas pipelines vandalism and crude oil theft.”

Why stopping oil thefts has proved impossible
To complement existing measures, the Goodluck Jonathan government set up a task force with specific mandate to prosecute offenders, but it was faulted by analysts who said there was no political will to contain the sponsors of the thefts.

Patrick E. Igbinovia, Professor of Criminology and Criminal Justice and Former Senior Research Advisor (Security And Strategy, SPDC) in University of Benin, says, “The enabling environment for crude oil theft and the complexity of players in the illicit business, including local youths and individuals from host communities, high levels of unemployed youth, armed ethnic militias, ineffective law enforcement officials, corrupt oil company staff, established international market for stolen oil, and endemic corruption makes it difficult and almost impossible to tackle the problem.”

Dr. Abdu had made a paper presentation to the United Nations on Non-Destructive Testing and had also partnered with NASA in the USA who supported his PhD programme. He had on November 24, 2010, made a second presentation of his prototype of system equipment to the Department of Petroleum Resources (DPR) of the Ministry of Petroleum Resources in Lagos to demonstrate his technology.

In November 2010 the National Petroleum Investment Management Services (NAPIMS), a subsidiary of the NNPC which oversees national investments in joint venture companies, production sharing companies and services contract companies, invited Dr. Ado to make a presentation of his prototype system equipment at the conference room in their Gerard Road Ikoyi office. In attendance were 30 government officials.

Also in January 2011, the Petroleum Resources Department of the Federal Ministry of Petroleum Resources commended Dr. Ado for another demonstration at their head office on 13th January 2011. Another presentation was made to the Nigerian Petroleum Development Company Ltd. Benin City on 24th April for which the MD, Engr. Abiye.H. Membere acknowledged vide letter ref NPDC/MD/05.23.

Upon satisfactory performance of the system, DPR and National Petroleum Investment Management Services NAPIMS wrote a letter dated 7th March 2011 to operators in Nigeria (SPDC, CHEVRON, NAOC, Exxon Moblie and Total advising them to consider the deployment of the system/equipment to mitigate against the incessant and continuous pipelines vandalism and oil theft. The NPDC, had through Its Mechanical Engineer, Engr. Okonkwo C.S. raised a memo dated 10th October, 2012, in which the recommendation of a comparison of the technology of three companies was made to the management of NPDC.

Dr. Ado’s company Geological Energy and Gas Ltd., at the end of the comparison, according to the memo, appeared to be the most attractive pipeline attack/leak detection strategy given Nigeria’s peculiar environment. The two other companies in the analysis were Messrs SDH Integrated Services Ltd. And Messrs Century Energy Ltd. and all companies could detect oil leaks.

However, other indices for comparison was medium of signal propagation and Dr. Ado’s company was wireless while the other two were fibre optic, life span of signal propagation device was 10-15 yrs for Dr. Ado’s company while the others were subject to the frequency of attack.

In the area of deployment, Dr. Ado’s company could conceal sensors at about 3-5km interval while the others could only lay fibre optic cables, with the former also being able to distinguish between hazardous and benign encroachment while the latter could not.

A practical demonstration of the technology has been done to the National Oil Spill Detection and Response Agency NOSDRA as well as the Task Force Workshop on Security in the Oil & Gas Industry on 24th May 2012.

There was also another practical demonstration at the office of Chief of Army Staff and PSO Army Headquarters, Abuja in December 2013. The Office of the National Security Adviser NSA, on its part, on 16 October, 2012, requested and invited Geological Drilling Limited to make presentation and demonstration of Real-Time Pipeline Monitoring System/Equipment against petroleum theft and pipeline vandalism vide a letter Ref No. NSA/A/205/C.

Twenty-two officials attended the presentation. Among them include Haruna O. Momoh, MD PPMC and Dep. Cmptr. Gen. NSDC Bello A. Sulyman and representatives from Office of the NSA, NOSDRA, NNPC and DPR.

Thereafter Prof. Soji Adelaja, Special Adviser on Economic Intelligence, Office of the NSA was assigned to submit report about the presentations.

By this time Geological Drilling Energy Services Ltd. had changed the name of the company to Acousto-Ultrasonic Integrity Energy Services Ltd. and duly notified NPDC who asked it to, within one week, submit fresh proposal for each pipeline segment vide a letter dated June 18, 2014.

On July 31, 2014 a meeting was held between Acousto-Ultrasonic Integrity Energy Services Ltd. and NPDC represented by its Chairman L.A. Okhagbuzo and five others.

At the meeting the Chairman commended Acousto-Ultrasonic for undertaking an important research and expressed the need to clarify and negotiate quotations submitted by the company and possible resource adjustment/alternative for price reduction.

At the end of the meeting, the summary of price negotiations agreed for Package 1 (18.6km 6″ pipeline Oziengbe-South EPF to Oredo Flow Station) had a negotiated amount of $2,740,962.26.

Package 2 (18.5km 10″ pipeline Oredo-Ogharefe Lact Unit had a final negotiated amount of $2,625,185.98 and the Chairman informed the company that the outcome was subject to management’s approval of the recommendations.

Since then, there has been no response from government which made Dr. Abdu to intimate the newly elected President Muhammadu Buhari.

In a letter to the new President, he states “I hereby implore the President to use this noble and indigenous technology to help complement the government effort in monitoring pipelines and combating the threat of pipelines vandalism and product theft.”

What Buhari should do
President Muhammadu Buhari, on July 16, 2015 said he would shift attention to the Niger Delta at the end of the month to decisively deal with the issue of oil theft in the country and said insecurity, sabotage, vandalism, corruption and mismanagement, were the most serious problems of the nation’s oil sector.

This is even as he, again, vowed to break the vicious circle of corruption, insecurity and downturn in the nation’s economy. President Buhari who made the remarks in an interview on the Nigerian Television Authority (NTA), said, “The amount of crude being stolen, the sabotage and the vandalism of our pipelines have cost the country a lot. If people know the cost of the crude we lose through the activities of theft and vandals, they would be amazed.

So, we are going to sanitize that sector and ensure that we plug all the leakages. We are trying to get the technocrats in the private sector to help us.”

But President Muhammadu Buhari may find that unmasking the Nigerian National Petroleum Corporation (NNPC) as he has promised, is a child’s play when compared with the herculean task of entering the dark world of age-long illegal bunkering spearheaded by principalities and powers in territorial waters.

Yinka Odunmakin, a social activist, had said that during the oil wars in the Niger Delta, Musa Yar’ ‘Adua, Nigerian late president, had to go to the creek to meet with Tom Polo, a former militant warlord, and advised that for Buhari to succeed, he must in the same vein reach out to those involved in the illegality.

“Buhari will need the buy-in of all the stakeholders for him to be able to stop illegal oil bunkering. He can’t use force. He must ensure that he does not cause another agitation in the Niger Delta”, he said.
* Nasir Imam & Victor Edozie – Daily Trust

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