It is inconceivable that Nigeria requires $1 billion to fight oil theft. But President Goodluck Jonathan said so last week in the Netherlands. The President indicated that the federal government has earmarked such amount to check crude oil theft, vandalism of oil/gas infrastructure and prosecution of oil thieves. It boggles the mind to think that the President’s antidote to this festering cankerworm that is bleeding the nation dry is to throw more money at the problem.
In 2012, Jonathan awarded a yearly contract worth N5.6 billion to former Niger Delta militants to protect oil pipelines. But that huge expenditure has failed. Rather than abate, the theft of crude oil has increased in magnitude and frequency. And it is quite pathetic that the federal government now seems helpless in fighting this menace. Granted, vandalism and kidnapping, two evils associated with brigandage in the oil-rich region, may have subsided. It is worrisome however that the contract awarded to the ex-warlords was misplaced. Now, as argued earlier by critics, it has proved more like a ploy to settle the restive militants. It is indeed money thrown down the drain.
While the government is searching for a formula to deal with this monster, the country is producing 400,000 barrels of crude per day, below its capacity owing to theft and pipeline closures. An estimated 100,000 bpd of oil was stolen from pipelines in the Niger Delta in the first quarter of this year, excluding those siphoned from export terminals. The theft, experts said, amounts to about 5 percent of the country’s current 2 million bpd production.
Managing Director, Nigerian National Petroleum Corporation (NNPC), Engr. Andrew Yakubu, has reported a loss of about 300,000 barrels of oil per day in 2013. That is about N1.8 trillion in oil revenue for last year alone. The corporation also lost 11.7 million barrels of crude oil between 2010 and 2012.The losses due to attacks on pipelines by vandals are equivalent to the total production of Equatorial Guinea and bigger than the entire production of Congo Brazzaville, Cameroon, Gabon and Ghana put together.
Often, officials have blamed the oil theft on ‘criminal gangs’. But the magnitude of the crime requires more than mere kid gloves. An in-depth report on crude oil theft in Nigeria prepared by the London-based global financial firm, Chatham House, has fingered a “complex criminal web that includes foreign oil traders, shippers, bankers, refiners, high-level politicians and military officials.”
Although there are small scale thieves who siphon crude to process in makeshift refineries, big time theft is perpetrated by well-organised syndicates. The report revealed how they break into wellheads and pipelines; install their own pumps and connect hoses to load crude oil onto barges. They later transfer the crude onto small tankers and when darkness falls, load same to bigger ships waiting offshore.
The report also identified the existence of too many “shadowy middlemen” as the bane of transparency in Nigeria’s oil transactions. It hinted that the theft is perpetrated by “a complex criminal web that includes foreign oil traders, shippers, bankers and refiners. It says “Nigerian crude is being stolen on an industrial scale. Proceeds are laundered through world financial centers and used to buy assets in and outside Nigeria.” Nigeria lost 2.3 million barrels of oil in 2010; 6.3 million in 2011 and 3 million barrels in 2012.
To tackle this debacle, government must muster enough courage to deter, detect and punish those engaged in this illicit business no matter how big and influential they may be. All proceeds of oil theft, at home and abroad, must be seized by government. That option remains the most sensible.