Mele Kyari, GMD NNPC Limited
Oil Theft Now National Emergency – Kyari, NNPC GMD
. Says, Its Every Nigerian’s business to tame it
By DELE FASHOMI
In Nigeria’s oil industry, the thief is the patient dog that eats the fattest bone, taking shortcuts to harvest bigger, fatter, chubbier and ultimately, more comfortable than the owner. At the last count, Nigeria is said to be losing approximately between N30 trillion and N60 trillion yearly to oil theft, and its adjoining other vices of illegal refining and pipeline vandalism.
Indeed, level of oil theft is more than triple Nigeria’s 2022 Budget of N17.126 trillion, and also double the combinations of Nigeria’s three year’s budget of 2019, N8.9 trillion; 2021, N13.6 trillion; and the N17.126 trillion of 2022 budget, altogether put at N38.276 trillion.
Of course, he who wears the shoes, knows how and where it pinches, this explains why the voice of the Group Managing Director and Chief Executive Officer, GMD/CEO, of the Nigerian National Petroleum Company Limited, Malam Mele Kyari, has been consistent and strident on taming the monster of crude oil theft, which is threatening the collapse of the Nigerian economy.
Malam Kyari aptly described oil theft as a national emergency on account of its current proportion, dimension and sophistication. According to him, Nigeria, as an oil producing country, ought to be enjoying a windfall now with the sudden rise in crude oil price on the international market due to the Russia-Ukraine crisis.
It is observed that before the Russia-Ukraine crisis, crude oil was selling at $96 and $97 per barrel. However, it immediately shot up to $105 per barrel the following day the conflict began. It has, however, stabilized between $110 and $125 per barrel.
Unfortunately, Nigeria is not reaping as much from this current high crude price in the global market because it is unable to meet its Organization of Petroleum Exporting Countries’ quota. As a matter of fact, its crude oil production has dropped sharply to an all-time low of 1.29 million barrels per day (without condensate) and with condensate, it amounts to 1.49 million barrels per day.
A closer look at production figures from 2020 till date shows how much of a monster crude theft has become. The average crude oil production in 2020 was put at 1.77 million barrels per day. This was the year of COVID-19, with its attendant total global lockdown, which saw the price of crude oil crashing to near zero levels obviously with the unprecedented dip in demand.
Interestingly, this development resulted in zero crude oil theft in Nigeria. The reason for this was obviously because there was no market for the thieves to sell their stolen crude. And this saw the country recording its highest production level of 2.49 million barrels per day, specifically on April 17. 2020.
The corollary of this, according to Malam Kyari, is that Nigeria, indeed, has the capacity to produce the figure of 2.49 million barrels per day at normal days, save from oil theft. The NNPC GMD/CEO noted that there was no special intervention of any sort from any stakeholder in the industry that led to that peak production on that day.
Conversely, however, it was observed that as the world started to return to normal situation with ebbing COVID-19 pandemic, and with the global crude price beginning to rise, the oil thieves in Nigeria started to step up their nefarious game and upstream operators started to experience production losses again. This has been growing since in almost direct proportion to the rise in crude oil price in the international market.
The climax was, however, in March 2022 when there was zero recovery from all the volumes of crude oil pumped into the line for the global market, indicating that the crude oil was harvested by oil thieves as it was being pumped into the line.
Explaining the sordid situation recently, the NNPC GMD said it came to a point where, if 239 million barrels of crude oil was pumped into the Trans-Niger Pipeline or Nembe Creek Trunk Line, two major pipelines that convey crude oil to the terminals for export, only 3,000 barrels would be recovered and received.
In particular, in January 2021, of about 239,000 barrels per day pumped into the line, only 190,000 barrels per day was recovered, putting the loss at 19,000 barrels per day. This reached a climax in March 2022 with the zero recovered crude oil from all volumes that was pumped into the line.
In all of these situations, there are noticeable patterns in the trends of this crude theft. One of these is that it is more endemic with Joint Ventures (JV) assets and those of the Independents than with Production Sharing Contracts (PSC) assets. This is said to be likely because of the nature of the JV assets which are mainly onshore or in swamp/shallow waters. Indeed, this makes the evacuation pipelines more accessible than those of the PSC assets which are offshore and in deep waters.
Another noticeable pattern in the crude theft is seen in both the size of the pipes inserted on the lines and the technology deployed in carrying out the insertion. In some cases, it is noted that the inserted pipes to steal the crude oil from the lines are small and are fitted in an amateurish way, indicating that those involved are small criminals, more or less like artisan refiners who are commonplace throughout the Niger Delta.
However, in other cases, the pipes are fitted into the lines to siphon crude oil are big, sometimes they are the same size with the pipeline or the size of the terminal to pump crude to vessels. The observation in this case is that the pipes are professionally fitted with a cutting-edge technology. In a few cases, it has also been observed that cranes were deployed. The indication of this process is that people involved are not the regular illegal refinery operators, but sophisticated and deeply knowledgeable criminal with have access to vessels through which they ship the stolen crude oil out of the country.
It is, in fact, the involvement of this latter group of sophisticated criminals that accounts for the high volumes of crude oil theft in Nigeria, the real existential economic threat to the oil and gas industry and even Nigeria as a country.
In terms of financial loss to the country, in 2021 alone, the total volume of stolen crude oil is put at 200,000 barrels per day. Thus, at an average price of $55 barrel, the total loss would come to about $1 billion, January to December, 2021.
In 2022, January to April alone, the volume of stolen crude rose to about 250,000 barrels per day, putting the total loss at about $1.5 billion, at the rate of $100 per barrel.
Indeed, the Trans-Forcados Pipeline, about the most reliable of all the land lines, is not spared of all theft, recording about 19,000 barrels per day.
This is not to say that grave dangers of the artisan refiners and their illegal refineries are by no means very serious and destructive. They constitute dangerous environmental hazard regarding heavy pollution they cause from their activities. This causes unquantifiable health challenges to both humans, livestock and the eco-system of the community.
The challenge of environmental pollution is linked with the case of sheer vandalism of oil pipelines and oil facilities, where they are just blown up with explosives by members of the communities.
There are also cases where pipelines are breached with insertions just as the international oil companies mend the punctured holes in them. It was observed that on the stretch of 20 kilometers pipeline, there were 85 insertions and breaching points in only three weeks.
The end-result of all of these vices is endless and continuously seeping and spreading oil spillages in the Niger Delta, from Akwa Ibom State to Rivers State, and from Delta State to Bayelsa State.
Another important area where the humongous oil theft is affecting Nigeria’s economy is dwindling investment in the industry. This has obviously slowed down investment and has nullified the expected gains from the Petroleum Industry Act, which was billed to increase investment in the industry. Potential investors now fear whether they can recoup their investment with the humongous oil theft in the country.
There are five strong International Oil Companies, IOCs, operating in Nigeria, including Shell, Mobil, Chevron, Total Energies and Eni Oil. Together, they are said to represent 45 percent stakes in the Nigerian oil and gas industry. However, many of them, especially Shell and Mobil, are not only divesting from shallow waters, but from Nigeria, mainly because of serious oil theft and vandalism.
In the area of cost of production, nearly two years after the NNPC Limited announced plans to reduce the cost of oil production to about $10 per barrel, this effort has been frustrated by recurring oil theft, which has jerked up production cost to at least $32 a barrel.
The operators have observed that Nigeria’s operating expenses lack competitiveness as the country, in 2019, had one of the highest production costs with break-even point for major proposed projects hovering around $48 bbl, higher than Angola’s $45 and Uganda’s $44bbl.
Similarly, the operators lament the increasing cost of pipeline security and maintenance. For example, the NNPC Limited spent N32.25 billion on pipeline security and maintenance within the first seven months in 2021, above N29.6 billion it budgeted for whole year. This is a reflection of the increasing vandalism and frequency in maintenance, piling up more cost for operators.
For leading geologist, Mr. Tunde Ogunwole, the fact that more of the crude oil is stolen, it means the cost of production is unreasonably high in the face of the operators keeping their staff and maintaining operations and the office.
He said the incidence of stolen crude oil has grown from just oil theft to organized crime, especially with the level of sophistication of their operation.
The operators are, therefore, toying with many ideas to stem the huge stolen crude oil in the country, including adopting the option of trucking crude. But the Chairman and Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, Gbenga Komolafe, said while he agreed that alternative evacuations that are proposed now are an intervention mechanism that cannot be a permanent solution to the problem of oil theft the industry is facing, the truck option is froth with dander of attack by the criminals.
He said the factors aiding the criminal activities to include economic challenges, inadequate security, poor surveillance, poor community engagements, exposed facilities and security and stakeholders’ compromises, adding that the increasing high level of crude oil theft has made the country unable to meet its OPEC quota.
Against the prevailing scenario, however, President Muhammadu Buhari recently gave a marching order to the Chief of Defence Staff, CDS, General Lucky Irabor, to lead the war against oil theft criminals. The operation seemed to be yielding results as many illegal refineries were destroyed, including ovens, boilers, metal storage tanks, Gee-Pee tanks, drums, jerry-cans, galvanized pipes, dug-out pits, warehouses and pots.
In the sweeping operation across the Niger Delta, 6,679,000 litres of illegally refined AGO, 4,436,000 litres of stolen crude, one gunboat, one BMG gun, one AK47 rifle, five MCs, several rounds of 7.62mm special ammunition, 12 motorcycles, 20 wooden boats, 15 pumping machines, two trucks, three speedboats, five engines, one Keke tricycle, and five vehicles were recovered.
Also, 70 economic saboteurs linked with pipeline vandalism and other vices were apprehended and handed over to appropriate authorities for prosecution, with General Irabor promising to arrest not only the foot soldiers, by also their sponsors.
And as part of the ongoing measures to fight oil theft in the country, the NNPC has also deployed community-based security monitors for the pipelines, while it is also working on deploying technological tools for more effective surveillance and monitoring of the lines and facilities.
On the part of the Economic and Financial Crime Commission, EFCC, and Nigerian Financial Intelligence Unit, NFIU, are also tracking movement of funds relating to oil theft.
Indeed, the NNPC GMD is confident of the success of the collaborative efforts so far by government, security agencies, host communities and oil companies, and deployment of right technology. However, Malam Kyari believes oil theft and pipeline vandalism are problems of every Nigerian.
He explains that apart from the host communities that are directly affected by the environmental degradation, every citizen suffers the loss of national revenue when government does not have enough to provide social amenities and infrastructure to improve the quality of life in the country.
Kyari insists that it is imperative for all Nigerians to rise up against those behind crude oil theft and pipeline vandalism “with a view to stamping them out, so that the oil and gas industry can yield the fullness of its benefit to the nation and the citizenry.”