About a fortnight ago, it was all over the news that Angola overtook Nigeria to emerge as top African crude oil producer for the month of April. This is according to data from the Organisation of Petroleum Exporting Countries (OPEC). Available data released by the April 2023 Monthly Oil Market Report (MOMR) published by the oil cartel, maintains that Angola recorded 1.06 million barrels per day (bpd) of crude production in April, up from 972,000 bpd recorded in March.
But Nigeria recorded an output of 999,000 bpd in April compared to 1.3 million bpd in March. The April output figure represented the lowest production rate the nation has recorded in 2023. On an annual basis, the country’s output level also indicated a drop of 16.7 per cent to 999,000 bpd in April 2023, from 1.2 million bpd recorded in the corresponding period of April 2022.
Well, the reason for this isn’t farfetched. Blame it on the usual suspects of pipeline vandalism, crude oil theft and illegal bunkering and illegal refineries. In recent years, the country has recorded a surge in pipeline vandalism and crude oil theft incidents in oil-producing areas, a development that has worsened. A report by the Nigerian National Petroleum Corporation (NNPC) revealed that the Port Harcourt area, Rivers State, as the hotbed of pipeline vandalism, followed by Mosimi in Ogun State, and Kaduna areas.
Recently also, crude oil thieves disguised as sewage transporters were caught by private security operatives. According to the Nigerian National Petroleum Company (NNPCL), the crude oil thieves were captured lifting crude from an asset belonging to NNPCL. Before this, the NNPCL intercepted an illegal Crude Oil Barge and arrested six suspected crude thieves in Warri, Delta State. The Nigerian government and oil companies operating in the country have suffered huge losses due to crude and refined petroleum products theft. This is one of the reasons some international oil companies are auctioning their onshore assets in the country.
That the wanton destruction of the country’s strategic assets (oil pipelines) has festered for many years is not only a clear indication that the relevant security agencies have not lived up to their responsibility of protecting them. Bizarrely, some of those vandalising pipelines hold the notion that stealing petroleum products and crude oil is having their own share of the ‘national cake. Worse still is that some security agents connive with the thieves to perpetrate these acts of vandalism.
Nigeria and oil producers have been in a longstanding battle with illegal oil bunkers for decades, an activity that has resulted in significant losses for the country’s economy.The illegal activities affects monthly revenue remittance to the federation account. In January last year, the NNPCL did not remit any money to the federation account. On average, Nigeria loses about 200,000 barrels per day, according to the NNPCL. In its July 2021 audit report, the Nigeria Extractive Industries Transparency Initiative (NEITI) said Nigeria lost 42.25 million barrels of crude oil to oil theft, valued at $2.77 billion in 2019.
Oil spills and explosions are a regular occurrence in the Niger Delta. Pipeline vandalism from bunkering leaves pipes especially vulnerable to leaks, spills, and major accidents. Royal Dutch Shell PLC claims that 70% of all oil spills over the last five years were the result of sabotage to their facilities. In 2011, the United Nations Environment Programme found in Ogoniland, located in Rivers State, oil pollution had devastated mangroves, contaminated soil and groundwater, destroyed the fish habitat, and posed a serious threat to public health.
Refining oil illegally has also become so lucrative that many engage in the practice despite the dangers and crackdown. The deaths of more than 100 people following an explosion at an illegal oil refinery on the border of the country’s Rivers and Imo states didn’t stop many from getting involved in the dangerous practice. Illegal oil refining is essentially siphoning off crude oil from pipelines and redirecting it into tanks, generally in bushes and forests, where the crude oil is boiled at high temperatures to turn it into different petroleum products. Over the last year alone, according to government estimates, more than $3 billion of oil has been stolen through illegal refining. In comparison to legal oil refineries, the set up at these illegal refineries is much less sophisticated and there are far fewer measures to protect people and the environment — making the process extremely dangerous and often sparking huge explosions.
With the Dangote refinery commissioned on Monday by President Buhari and the BUA refinery well on its way, there is now hope of transforming the country into a net exporter of petroleum products. However, there might still be a challenge. The challenge here could be in securing crude supplies. This could delay achieving full production this year. Nigeria spent $23.3bn last year on petroleum product imports and consumes around 33 million liters(8.7 million gallons) of petrol daily. The Dangote Refinery has a capacity of 650,000 barrels per day. The refinery needs a constant supply of crude, but as earlier mentioned, oil production has been declining due to oil theft, vandalism of pipelines and underinvestment.
The protection of pipelines must be strengthened. Incessant attacks on pipelines could not have been happening without corruption and collusion with security agents and NNPC officials. Better technologies should be deployed to safeguard these strategic assets. The federal government can end oil pipeline vandalism by engaging all stakeholders in the oil and gas industry. The lack of engagement with the host communities is one of the major reasons of pipeline vandalism. There is also ahuge disconnect between the government and the people who have the capacity to solve these problems, this gap must be bridged immediately to allow the possible solution to thrive.
Notable strides recorded over the years in gaining a foothold in Nigeria’s upstream oil sector are gradually being eroded by oil theft which is also aided by the rising crude oil prices in the international market. Using technology is also a major way to go. A proven system of tracking every vessel and volume of crude oil leaving Nigeria to the spot markets and other parts of the world would be critical towards curbing bunkering. For instance, using Automatic Identification System (AIS) to track maritime vessels (that is ocean going vessels) carrying commodities; knowing exactly how much volume is being shipped across the globe and by whom in Real- Time can be employed.The devise, the seaborne flows are analyzedcargo by cargo revealing hidden patterns and trends in the market which could otherwise go unnoticed. It is still a big challenge but hopefully we will get a handle on vandalising of our oil.
