Nearly two years after the Nigerian National Petroleum Company Limited announced plans to reduce the cost of oil production to about $10 per barrel, this effort has been frustrated by recurring oil theft, and spiking production costs to at least $32 a barrel.
With losses from pipeline vandalisation and theft overwhelming international oil companies, many are already moving to the deep offshore region, while indigenous firms contend with rising operational expenses driven mostly by personnel, maintenance and security costs.
According to some operators oil is no longer stolen at the well-heads, as vandals have become innovative, bypassing the anti-ballistic pipelines to disrupt production.
Indeed, they have raised concerns about the culpability of the nation’s security agencies, noting that barges of oil could not have been stolen and moved on the coastal waters without collaboration of some powerful Nigerians.
The operators noted that Nigeria’s operating expenses lack competitiveness as the country, in 2019, had one of the highest production costs with break-even price for major proposed projects hovering at $48/ per barrel, higher than Angola’s $45 and Uganda at $44/ per barrel.
This necessitated the move for lower oil production costs in 2020, specifically, the $10 a barrel target. Now described as ‘organised crime’ and a national disaster, most stakeholders insist that crude oil theft, especially in the Bonny Terminal Network, Forcados Terminal Network and Brass Terminal Network, is now creating crude oil loss of about 91 per cent, meaning that the cost of production in those cases already stand above actual oil price, which hovers around $120 per barrel.
Nigeria lost $3.2 billion in crude oil theft between January 2021 and February 2022, according to the statistics presented at a meeting in Abuja recently between the Nigerian Upstream Petroleum Regulatory Commission, Oil Producers Trade Section, and the Independent Petroleum Producers Group to discuss crude oil theft.
“Although the issue is not new, it has grown from just oil theft to organized criminality involving sophisticated operations
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This puts the figure at about N1.36 trillion when converted to naira with the official N416.25 to dollar exchange rate, a development that has forced the country’s crude oil production to go way below quotas by the Organisation of Petroleum Exporting Countries and benchmark in the 2022 budget.
It was reported recently that only five per cent of all the crude oil that was pumped through the pipeline between October 2021 and February 2022 were received by producers. The rest were lost to illegal oil bunkering, a problem that seems to have taken a turn for the worse since global oil prices skyrocketed.
Many people were feared killed on April 22, 2022, when an explosion rocked an illegal crude oil refinery in Abaezi forest, Ohaji-Egbema Local Government Area of Imo State.
Several persons were also seriously injured and six vehicles razed in the incident.
Multiple witnesses in the local media, however, put the casualty figure between 100 and 200.
Consequently, the Imo State government has declared the owner of the illegal refinery, Okenze Onyenwoke, wanted.
Onyenwoke has been advised to make himself available to the police immediately.
A video clip shot at the scene of the incident and shared in various social media platforms shows horrible images of the victims burnt beyond recognition littering the environment.
Oil theft, known as “bunkering” in local parlance, has been a source of concern to many stakeholders across the country.
Although the issue is not new, it has grown from just oil theft to organized criminality involving sophisticated operations.
It is becoming a threat to investments, a threat to the health of the industry and wealth of the nation.
The level of sophistication in terms of tapping into the pipelines, the distributions, the efforts required in moving hundreds of thousands of barrels a day is not about some miscreants coming along and tapping into a pipeline and taking container crude oil, it is organized criminality.
Recently, the Federal Government raised alarm over the rising rate of crude oil theft in the Niger Delta, disclosing that about $3.27 billion worth of oil had been lost to vandalism and theft in the past 15 months.
The government also said high-level cases of oil theft had become a threat to the country’s corporate and economic existence, with the industry now thinking of transporting crude oil from fields to export terminals by trucks.
The Defence Headquarters also announced the destruction of 49 illegal refineries and arrest of 70 oil thieves and pipeline vandals in the Niger Delta.
On its part, the Nigerian Upstream Petroleum Regulatory Commission said the government is extremely worried about the huge loss of oil revenue to vandals.
Oil theft is further tied to the politics of Nigeria and the ownership of mineral resources.
Section 44 (3) of the 1999 constitution, item 39 schedules II of the exclusive legislative list and section 1 of the Petroleum Act, 1969, vests the ownership and control of natural resources in any part of Nigeria in the Federal Government for the benefit of the people.
For decades, the people of the Niger Delta and others have argued that this is a departure from the federal principle that Nigeria claims to embrace and that as operationalised, the Federal Government’s ascribed ownership of mineral resources amounts to gross injustice more so as the Niger Delta which produces the mainstay of the economy remains dispossessed, marginalised and underdeveloped compared to other parts of the country that contribute less, and yet seek to control what does not belong to them.
Some factors believed to be aiding these criminal activities include economic challenges, inadequate security, poor surveillance, poor community engagements, exposed facilities and stakeholders’ compromises.
Regrettably, due to the high level of theft, the country has been unable to meet its OPEC production quota.
It is important that government and oil companies work together to resolve this vexed issue, especially on the agreed volume of oil lost to vandals, since the issues strike at the heart of federation revenue.
The Federal Government should set up a crack team to determine the accurate figure because as a government, it cannot continue to act on the basis of an abstract or inaccurate figure in dealing with an important issue as crude oil theft.
The concern of the government should be how to increase our national oil production.
Basically, Nigeria is an oil economy and when the upstream is sick, it affects the well-being and health of the country.
The situation happening upstream is getting to the level of threat to the existence and well-being of Nigeria. Now is time to tackle it head-on.
