Who is stealing our crude oil?

When the nation’s chief budget officer, Ben Akabueze, appeared on TV the other night to explain the financial crisis the country is facing, it was apparent that he knew more than he was willing to let out. He said the country is managing to produce 1.3 million barrels of crude oil per day whereas the 2022 budget had provided for 1.8mbpd which has since been downgraded to 1.6mbpd. The significant low production level, he said, is due to massive oil theft. “This translates into a huge revenue loss to the country, and it is one major reason we are facing a serious fiscal crisis,” said Akabueze. But when the interviewer pressed Akabueze to open up on the identity of these thieves, he quipped: “You are asking me a question that is beyond my paygrade”. I laughed. No senior government official would talk so openly about the biggest, industrial-scale robbery in the country.

Crude oil theft has become the biggest organized crime in Nigeria’s history, leading to a huge loss of revenue to the government, fiscal crisis, environmental pollution and a near crippling of the oil industry. The country lost $1 billion in revenue in the first quarter of this year to oil theft. Shell Petroleum, a one-time largest crude producer in the country, has been divesting completely from its onshore blocks and concentrating only on offshore production. But lately, the company has been thinking of leaving the country because of diminishing revenue. Shell’s CEO in Nigeria, Osagie Okunbor announced early this month at an oil conference in Abuja that two of its major pipelines have shut in due to vandalism.

Another oil exec, Mike Sangster, estimates that about 100,000 barrels are stolen a day. With a barrel selling for $100, this is an income of $10 million a day for the thieves. ‘’That’s a huge loss for the country’’, says Sangster, the CEO of TotalEnergies EP, who was also at the oil event. Total’s OML 58 had been shut in since February due to vandalism. Nigerian investors are particularly squeezed by these criminal activities. Tony Elumelu of Heirs Holding Oil & Gas recently cried out that his company is losing 95% of its revenue to oil theft. Recall that Heirs Holding had acquired a 45% stake in OML 17 from Shell, Total and Agip. Many other Nigerian investors who made similar investments are crumbling under rising costs and dwindling revenue streams.

Although a small part of the stolen crude is being refined by artisanal refineries in the Delta region and sold on the black market, a huge part is shipped away and sold outside the country. The cartel behind this massive theft of our oil resources is made up of Nigerian security officers and some politicians (governors, senators and many others). Every important politician in the region and many others across the country are involved in this massive crime. They are adequately backed up and protected by the security forces who also share in the booty. The robbery is so massive that it has sent international oil companies scampering away, with some like Shell threatening to leave the country for good.

To fully understand the character of the oil thieves, it is important for Nigerians to learn more about this massive crime. As we all know, our country has many oil and gas wells in oil blocks located on land, swamp shallow offshore and deep offshore terrains. Land and swamp locations are generally referred to as onshore locations while oil blocks in Nigeria’s Atlantic Ocean economic exclusive zone are said to be in offshore locations. The offshore location is broadly grouped into shallow water locations with water depth generally below 500m and near shore and deepwater locations with water depth between 500m and 3,000m and far into the ocean from shore. For oil blocks located in Nigeria’s onshore and shallow water locations, crude oil is transported through pipelines from the point of extraction (the oil wells) to the point of storage for sale (the terminals at QIT (Mobil), Bonny (Shell), Forcados (Shell), Brass (Agip) and Escravos (Chevron).

In countries with functioning refineries, crude oil from the oil wells is sent straight to the refineries through pipelines. But there is no functioning refinery in Nigeria, so all crude oil produced in the country is exported. Since 1958, gas has been flared until the late 2000s when most of it is collected for economical use at NLNG, power stations and Eleme Petrochemical Plant (now owned by Notore).

Crude oil in deepwater locations is stored in floating storage vessels in that location awaiting offloading tankers to come along for offtake. So, deep offshore production is not affected by pipeline tampering and oil theft.

Oil theft is therefore rampant onshore where crude oil pipelines from the wells to the terminals pass through the land, swamp and shallow near-shore part of the Atlantic Ocean, making them so easily accessible to the thieves. Over time, many Nigerians have acquired the skills and tools needed to hot-tap into a pipeline carrying flowing crude oil, which is part of a normal IOC’s oilfield standard practice for operational purposes. In addition, Nigerians also own large-sized barges capable of carrying thousands of barrels of crude oil. These barges have a plow enough draft to sail through the shallow and narrow Niger Delta creeks. These skills and equipment are now being deployed for illegal activities of oil theft. Note that these barges could just as well be used to execute legitimate contracts from oil companies.

Under security cover and with political protection, the syndicates move highly skilled personnel (perhaps former oil workers) and the hot-tap equipment into the forests on land or creeks in the swamp. A hole is safely introduced into the live pipeline and crude oil is siphoned into a truck on land or a barge in the creek. As a side activity, a small portion of the siphoned crude oil is taken through a very primitive and highly inefficient refining (cooking) process to produce a very poor-quality diesel that damages engines.

The loaded trucks are driven to a jetty and offloaded into barges which sail out to a waiting crude oil tanker on the Atlantic Ocean or a land terminal in nearby countries or even an island in Atlantic Ocean. It might take a week or two to fill a tanker with capacity of 250,000 to 500,000 barrels of oil petroleum.

Meanwhile, there are government agencies monitoring movements of vessels in Nigeria’s inland waterways and our portion of the Atlantic Ocean.

How do these barge movements get through Nigerian waters, for many years now, without at least one of them being caught and everyone associated with that vessel and its movement identified and brought to book? Where are NIMASA, Marine Police, Nigerian Navy and Nigerian Inland Waterways when these highly visible and identifiable barges move along the Nigerian waters and out into the Atlantic Ocean? Why are they not apprehended? These movements occur daily in Nigerian waters and into the Atlantic Ocean. Why are they not arrested? It is because senior government officials are part of this illegal business and they offer protection to the criminals.

Contrary to some insinuations, it is not the responsibility of oil companies to apprehend these barges. Meanwhile, the community leaders, whose environment has been completely devastated by illegal refineries, have been conditioned to look the other way.

Clearly, the apparent involvement of senior politicians and security people is why the government appears unable to stop this enormous steal. I do not know of any other country in which the government is part of this type of organized crime.