Nigeria oil theft becoming the worst with over 60,000 barrels stolen per day

Photo: Yahoo

by Rachel Ogbu

Photo: Yahoo

Photo: Yahoo

The volume of oil theft is the highest in the last three years with over 60,000 barrels stolen per day

Yesterday, Royal Dutch Shell Plc (RDSA) announced that concerning Bonny Light Crude exports, thefts threaten to outdo 2009 which was the worst year at the height of the insurgency by militants in the Niger River Delta.

According to reports, there has been an increase in oil thieves sabotaging pipelines to steal more than a 10th of Nigeria’s daily production, so far this year, Shell and other oil companies have declared four forced majeures, a legal phrase that permits them to miss contracted deliveries due to circumstances beyond their control.

“The situation in the last few weeks is unprecedented,” Shell Nigeria’s Managing Director Mutiu Sunmonu said.

Former Nigerian diplomat Patrick Dele-Cole reportedly said: “We believe that criminal syndicates control the vast majority of crude oil theft in the Niger delta. The Nigerian government and its international partners have not focused their attention on gathering the evidence required to clearly indicate who these people are.”

Dele-Cole who established a “Stop the Theft” campaign, confirmed that up to 250,000 barrels of crude were stolen every day.

Bloomberg reports:

Nigeria depends on crude exports for 80 percent of government revenue and 95 percent of its export income. The Hague-based Shell, Exxon Mobil Corp. (XOM), Chevron Corp. (CVX), Total SA (FP) and Eni SpA (ENI) run joint ventures with state-owned Nigerian National Petroleum Corp. that pump most of the country’s oil. The West African nation was the seventh-biggest producer in the Organization of Petroleum Exporting Countries last month, with output at about 2.1 million barrels a day.

Weapons Returned

A leak noticed on March 3 on the Nembe Creek trunk line, which supplies the Bonny Export Terminal, “necessitated its immediate shutdown” and a force majeure, Shell said today in an e-mailed statement. Exxon Mobil ended a supply warning on Qua Iboe oil exports it made on Feb. 7 after two weeks. Shell’s Feb. 5 force majeure on gas supplies to Nigeria LNG Ltd., after thieves ruptured a pipeline, is still in place, Precious Okolobo, a Lagos-based spokesman, said by phone today.

Bonny Light crude, Nigeria’s top export grade, rose 0.4 percent to $113.29 a barrel as of 4:19 p.m. in London.

In 2009, during the insurgency by the Movement for the Emancipation of the Niger Delta, companies declared force majeure 12 times. The figure, which dropped to four in 2010 after the government declared an amnesty for MEND fighters, was back up to 11 last year as thousands of former rebels who gave up their weapons returned to a life of crime.

‘Stop Theft’

“There have been growing opportunities for some of these organized criminal syndicates to operate with greater impunity,” Roddy Barclay, an analyst at Control Risks, a London-based business consulting group, said in a phone interview. “Certainly some of the ex-militant actors that were engaged in the armed attacks against the oil industry are now also involved in the more criminally lucrative” theft.

President Goodluck Jonathan is seeking international help by approaching countries that receive stolen crude from Nigeria or where the proceeds are laundered to help close the loopholes, Petroleum Minister Diezani Alison-Madueke said on Feb. 19.

While Jonathan gave the navy “a specific mandate to curb” oil theft, the Chief of Naval Staff, Vice Admiral Dele Ezeoba, said in Abuja, the capital, on Feb. 21, it’s difficult to eradicate because of the expanse of pipelines covering a 70,000 square-kilometer (27,027 square-mile) region. That is bigger than the U.S. state of West Virginia.

Boiling Crude

The thefts cost the government $7 billion in revenue in 2011, about a quarter of this year’s national budget, according to the central bank.

The armed gangs are tapping crude from pipelines either for local refining or to move it in barges for sale to tankers waiting off the country’s Atlantic coast.

The ships then take it to destinations as far flung as the Balkans or Singapore, says Dele-Cole, whose son Tonye Cole runs Sahara Energy Field Ltd., a Lagos-based oil exploration and trading company.

To refine the oil, gangs boil the crude in large, open cauldrons, a process that often results in burning down large patches of the Niger River delta’s mangrove and rain forests and polluting its rivers. Their gasoline grade, known locally as Asari, after former militant leader Mujahid Dokubo-Asari, is sold at filling stations in the region, according to Sam Dike, a taxi driver in the southeastern city of Owerri.

State Prosecution

Nigerian prosecutors charged 22 people, including 10 Indian nationals, with oil theft in the southern city of Yenagoa on Jan. 23. A 15-man Russian crew is also facing charges of weapons smuggling after their vessel was seized in waters in the oil region in October, with authorities alleging links with the oil gangs.

At least 7,000 improvised refineries dotting the delta were destroyed by troops in the past two years, Joseph Okogie, a navy spokesman, told reporters last week.

Real Deal

“Given the magnitude of the leakages, a more proactive and comprehensive approach is probably needed to curb oil theft,” Samir Gadio, a London-based emerging-markets strategist at Standard Bank Plc, said today in an e-mailed response to questions. While an Islamist insurgency in the country’s mainly Muslim north has captured the government’s attention in recent years, “there seems to have been less focus on the Delta lately, even though this region generates an overwhelming share of government revenue.”

The former rebels are turning to crime because the government failed to follow up the amnesty by meeting their demands to end poverty and grant the region more benefits from crude production, said Anyakwee Nsirimovu, executive director of Institute of Human Rights and Humanitarian Law, based in the oil industry hub of Port Harcourt.

“When the government failed to do what they’re supposed to do, self-help became the real deal,” said Nsirimovu. “As long as politicians are sitting in government houses, sitting in the legislature and stealing public money, then you must always find people who are cooking crude oil somewhere to make ends meet.”


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