By: Okafor Joseph
Saturday, May 11,2019
Illegal bunkering and Oil theft have continued to threaten the growth and survival of the Nigerian economy and has continued to cause pollution of the environment in the Niger Delta region. The combination of crude oil theft, illegal refining and pipeline vandalism has become a major threat to Nigeria in meeting the Government’s revenue projections in recent time.
The term illegal bunkering encompasses all acts involving oil theft, including diversion and smuggling of oil and unauthorized loading of ships. One common process requires tapping into an oil pipelines and well heads and transporting the oil elsewhere to be sold internationally or refined locally. To access the oil, a small group of welders will puncture a pipeline or well head at night, establishing a tapping point from which the group can operate.
Oil theft, and illegal bunkering occur throughout the Niger Delta. Leaks in pipelines in the Niger Delta are often caused by oil theft and operators have frequently declared force majeure on exports of key Nigerian crude grades. Oil spills and explosions are regular occurrences in the Niger Delta, as pipeline vandalism from bunkering leaves pipes especially vulnerable to leaks, spills, and major accidents.
IMPACT ON THE ECONOMY AND THE ENVIRONMENT
Although estimates of how much oil is stolen per day in Nigeria vary, the British think-tank ‘Chatham House’ reports that over 100,000 barrels of oil were estimated to be stolen per day. Also, the United Nations Security Council estimates that Nigeria lost $2.8 billion of revenue to oil theft in 2017. It has also been reported that every day, oil companies in Nigeria lose between 300,000 and 400,000 barrels of oil to illegal theft. Theft accounts for roughly 15 percent of total number of barrels per day produced.
Oil export revenue accounts for 70 percent of Nigeria’s total government revenue and 95 percent of the country’s export income. A loss of 300,000 barrels a day costs the government roughly $1.7 billion a month. In comparison, only 5,000 to 10,000 barrels are stolen per day in Mexico, which produces a comparable amount of oil. Despite efforts by the Nigerian government to curtail bunkering by increasing security, theft and pipeline vandalism continues.
It has been reported that roughly a quarter of stolen crude oil is sold locally. Illegal artisanal refineries located in the Niger Delta “cook” the crude into separate petroleum products. The product yields 2 percent petrol, 2 percent kerosene, and 41 percent diesel. The remaining 55 percent of crude goes to waste, most of which is dumped into the nearby water or into a shallow pit, resulting in environmental and health hazards
The impact of these criminal activities on the safety of people and the environment is huge. This includes degraded local environments, pollution of the environment at tap points. Over 50% of the crude oil siphoned in the process due to high pressure, besides waste of oil residues, are pumped into the creeks, rivers, farmlands, ponds, lakes, thereby blighting the environment further. The degradation to the environment occasioned by the illegal bunkering and oil theft, has reduced arable land for farming and has devastated fishing communities.
IMPACT ON THE INDUSTRY
Every IOC and indigenous operators in Nigeria have been affected in one way or the other by the activities of oil thieves, engaging in illegal bunkering and “local refining” operations. Their activities continue to cause significant damage to the environment. Recently, an indigenous company declared force majeure on Nembe Creek Trunk Line, due to a fire suspected to have been the result of an illegal third-party breach. It was reported that the incident caused Nigeria’s oil production to fall 8 percent per day. The Nembe Creek Trunk Line is one of the two key pipelines of Nigeria’s Bonny Light crude grade capable of transporting 150,000 bpd to the export terminal. Shortly after, one of the IOCs declared force majeure on Bonny Light exports, while exports of Amenam, operated by another IOC, were also under force majeure.
There have also been several incidents of third-party interference, tampering with mechanical components and the installed barriers on crude oil well heads, with evidence of illegal bunkering from the wells. For each incident, the oil companies take steps to immediately re-secure the wells. But the criminal activities persist and sometimes result to explosions and, or fire incidents.
This was the case with one of the IOCs – Chevron Nigeria Limited (CNL), operator of the joint venture between Nigerian National Petroleum Corporation (NNPC) and CNL. At about 10:00 p.m. on Thursday, April 18, 2019, a fire was observed at the Ojumole Well No. 1, an idle and plugged well with no flowline connected to it. Ojumole field is in NNPC/CNL JV’s Western Niger Delta area of operations.
A Joint Investigation Visit (JIV) to the site of the incident on Saturday April 20, 2019, by a team made up of regulatory agencies, community stakeholders and CNL, determined that the fire incident was caused by third-party interference. Environmental monitoring by independent, accredited environmental consultants is ongoing in the area, while the company is currently working with contractors to safely put out the fire as quickly as possible.
While engagements with relevant stakeholders including the government, regulatory agencies and community leaders and efforts in putting off the fire are ongoing, we must not lose focus on the cause of such incidents and the need to educate our people on the implications of the criminal activities of oil theft and illegal bunkering. It seems normal to lambast oil companies any time such incidents occur and label them as negligent, but we hardly ever caution our people and condemn their criminal activities. The perpetrators of oil theft and illegal bunkering are not spirits; they live amongst us and even exhibit pride in what they do.
THE WAY FORWARD
Some analysts maintain that one solution to the issue of illegal bunkering is the establishment of modular refineries in the Niger Delta. The Federal Government has expressed commitment to pursuing the goal of establishing such refineries. A total of 38 licenses have been issued to prospective operators, ranging from high-scale refineries of 50,000 to 100,000 barrels per day. Reports show that out of these, about 10 of the modular refineries have advanced and they have all secured permit to construct.
The truth of the matter is that until illegal bunkering and oil theft is reigned in, the Nigerian economy will continue to suffer the loss of revenue from thousands of barrels of oil every day. Perhaps more importantly and too often overlooked, the Nigerian people, especially generation yet unborn, will continue to cope with the consequences of their destroyed environment.