How Nigeria can tame massive crude theft

With crude oil revenue no longer able to paper over the cracks in the Nigerian economy, some operators have suggested options that can tame the rising spate of oil theft in one of Africa’s biggest oil-producing countries.

Senior oil executives surveyed by BusinessDay recommend litigation against oil thieves and their buyers, asset forfeitures and anti-money laundering actions, increasing coastal security in Nigeria and adoption of Mexico’s model as necessary steps in curbing massive levels of theft on the pipelines that crisscross the oil-rich Niger Delta in southern Nigeria.

“Indications suggest the Nigerian government knows some of the oil thieves but is hesitant to prosecute. However, as things degenerate, it is inevitable that a scapegoat will be singled out,” a senior oil executive in an indigenous oil company told BusinessDay.

He said through cooperation with international law enforcement agencies like Interpol, “the flow of money between buyers and sellers of stolen oil can be traced, forcing oil thieves to either abandon the practice or pressured into making even bigger mistakes that will lead to them being caught”.

For Ola Alokolaro, partner, energy and infrastructure at Advocaat Law Practice, taming rising crude theft, now described as ‘organised crime’, happening more frequently at Bonny Terminal Network, Forcados Terminal Network, and Brass Terminal Network must involve a cross-border strategy.

“We must also enforce laws. Enough of the carrot and stick approach to what is economic sabotage,” Alokolaro said.

He warned that Nigeria may declare bankruptcy if the menace of rising crude theft is not curbed quickly.

“We must use technology to arrest this situation promptly as the fall out if not checked would be calamitous,” Alokolaro said from Nigeria’s commercial capital.

Patrick Okigbo, founder of Nextier, said with support from a development partner, his organisation had designed a community-based pipeline surveillance system for the Nigerian National Petroleum Company Limited showing how to turn the thieves into partners but that the plan was never implemented.

“It is, therefore, no surprise that oil bunkering, which was a festering sore, has become cancer. There is still time to revisit the plan,” he said.

Between January and July, Nigeria lost an average of 437,000 barrels of oil a day to criminal entities and individuals who illicitly tap pipelines onshore and offshore in the Niger Delta region, BusinessDay’s finding showed.

At current prices, the stolen oil is worth more than $10 billion, which is equivalent to N4.3 trillion (at N430 to a dollar).

Read also: PENGASSAN threatens nationwide strike over oil theft

This financial loss is more than a third of Nigeria’s current external reserves. It is also more than double Nigeria’s total revenue between January and April, a period when the country’s total revenue was unable to service its debt and the country had to borrow for everything else including payment of workers.

Niyi Awodeyi, CEO of Subterra Energy Resources Limited, recommends the adoption of Mexico’s model in tackling a large chain of individuals which includes security operatives, and individuals from all walks of life, all having different roles to play.

Lessons from Mexico

Fuel theft and illicit sale of fuel, known as ‘huachicoleo’, have been a problem in Mexico for decades but President Andres Obrador in 2020 enacted a range of measures to stamp out the practice and crush corruption and organised crime.

According to a transnational think-tank union, International Crisis Group, President Obrador tightened criminal penalties, sought alternative means of fuel transport, and increased reliance on the military to protect pipelines.

“President Obrador increased the maximum penalty for fuel theft (from 20 to 30 years) and took away the licences of stations found to sell stolen petrol,” the International Crisis Group said.

Mexico’s state oil company Petroleos Mexicanos (Pemex) said in a recent presentation that stolen crude oil was reduced from 81,000 barrels per day (bpd) to 4,400 bpd as at 2020 while an estimated $5.02 billion had been saved from crude oil theft since Obrador took office in December 2018.

Beyond heavy military clampdown, reports also showed the President rescinded contracts of Pemex’s workers accused of oil theft.

“Without exception, any employee linked to the crime will be removed immediately,” the company said in a statement seen by Reuters.

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