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How They Steal the Nation’s Oil

[TELL] While Nigerians are yet to savour the return of relative calm in the restive Niger Delta following the 2009 amnesty for militants, the stealing of crude by a powerful and well-connected syndicate is on the upsurge, drilling holes in the coffers of government and oil multinationals

Thick black smoke billowing from crudely fabricated heating drums and chambers could be seen at about 4,500 feet above sea level from a helicopter. The drums are used to heat up crude oil to near cracking level to get fairly refined automotive gas oil, AGO, otherwise called diesel, and a poor form of premium motor spirit, PMS, or fuel. Steel pipes are welded in at strategic angles for easy evacuation of ‘refined’ products. One of the pipes acts as a returning pipe in the process. Other raw materials spotted in the area when the magazine visited the place recently included buckets, speedboats (or canoes), jerry cans and drums used in storing both the crude oil and the ‘refined’ products. Blighted large swathes of the surrounding ecosystem bear evidence of the high tempo of ‘industrial’ activities going on in the area. Welcome to Krakrama-Bille community, one of the communities in the oil-rich Niger Delta where illegal refineries thrive. The community is located few metres from the shoreline of Rivers State, South-south Nigeria.

Krakrama-Bille, as the magazine’s investigations show, is just one out of hundreds of communities in the creeks of the Niger Delta region hosting illegal refineries. Other communities such as Bodo in Ogoniland, Awoba Riser, and Ekulama (all in Rivers State), as well as other communities in Bayelsa, Abia, Akwa Ibom, Imo, Ondo, and Cross River states, are also operational bases for illegal refineries. Crude for the illegal refineries are often stolen from facilities owned by oil multinationals, especially flow lines and wellheads in the onshore and near-shore Niger Delta, by a powerful and well-connected syndicate that specialises in the stealing of crude through illegal bunkering and pipeline vandalisation. The syndicate, the magazine learnt, comprises the locals (mostly Niger Delta militants), allegedly backed by security agents and highly placed government officials, which is why the Department of Petroleum Resources, DPR, the police arm of the nation’s oil and gas industry, and other security agencies have not been able to halt the booming crude oil theft.

As a senior official of the DPR admitted, “The business of oil theft is a big time business that flourishes because it is backed by the high and mighty in the society. The oil thieves themselves are usually armed while those escorting them are armed to the teeth. For our men, the DPR, we are not armed. So, how do we confront the oil thieves?” he asked rhetorically. According to the official who spoke on condition of anonymity, first because he was not authorised to speak and also for his safety, officials of DPR are usually assigned to monitor crude oil at the various production platforms, but have failed to stem the rising tide of crude theft because of what he blamed on lack of inter-agency collaboration, as each agency struggles to make itself relevant to justify its existence. “In the course of doing this, they tend to discredit the activities of others while the oil thieves are having a field day,” he told the magazine, adding that the difficulties the oil thieves are having in recent times taking the oil out of the country have forced them to resort to building makeshift refineries where the crude oil is ‘refined’ to extract petrol and other byproducts which are sold to the unsuspecting public.

Although crude theft is certainly not a new phenomenon in the country, the business considered by many experts and stakeholders as perhaps the worst form of economic sabotage has in recent times assumed an alarming dimension that poses real threat to the socio-economic well-being of Nigerians. The scale, level of sophistication, sheer bravery and ingenuity of the barons has been fuelling suspicions of connivance of the oil thieves with the top brass of the various security agencies and government officials and also giving the oil multinationals and government cause for worry on account of its obvious implications. “Crude theft has always been there but we are more worried now because of the alarming scale it has assumed. The scale has reached a point now where we must worry, and that for me is the real problem. A lot of people sit back and think it is a Shell issue; but it is not; it is even as big as being a regional issue based on the scale we are seeing.  This could mean the instability of the region itself,” lamented Tony Attah, vice president, health, safety, environment and corporate affairs, Shell Petroleum Development Company of Nigeria Limited, SDPC.

Mavuaye Orife, managing director, Versa-Tech. Nigeria Limited, a Lagos-based firm of petroleum consultants, could not agree less. Orife, a former staff of the Nigerian National Petroleum Corporation, NNPC, for 22 years, noted, for instance, that until 1990 when he left the services of the corporation as founding head of National Petroleum Investment Management Services, NAPIMS, and veered into private consultancy, oil theft through bunkering and vandalism was alien to the country. He, however, regretted that such vices have been in the upswing in recent times, driven by what he described as greed by the managers of the country’s oil resources. While noting that such greed is responsible for the inequitable distribution of the proceeds from the common wealth, he however, argued that oil thieves who now see the plundering of the oil wealth as viable alternative could not have been ordinary Nigerians but a privileged few who understand the system and enjoy the tacit support of security agencies.

“These people are not minions. Oil theft is not an operation for poor people; it requires a lot of logistics and other technical knowledge to be able to steal oil from high pressure pipelines,” he told the magazine, noting that the oil thieves could not have been able to break into a high pressure pipeline, steal crude and seal it up again if they are not technically sound with deep knowledge of the system. The modus operandi of the oil thieves lends credence to Orife’s position. For instance, as the magazine’s investigations revealed, there are two main methods of stealing crude from the various pipelines that crisscross the Niger Delta region, with each method requiring a certain level of technical skills and understanding of the system. The oil thieves rip open an oil pipeline, using either a welding machine or a hacksaw, a technique known as “hot tapping” in bunkering parlance.

Hot tapping, it was learnt, is when a branch connection is created through a pipeline in which the oil is flowing through. From there, a rubber hose is inserted into the oil-gushing hole and clamped with a valve. When the oil thieves are done, they close the valve for subsequent consignments. If undetected, the siphoning business would go on for days or weeks until the supply source to the pipeline runs out. The second method called ‘cold tapping’ is when oil bunkering gangs blow up a pipeline, using a dynamite or any other explosive, putting it out of use long enough for them to attach their spur pipeline. This means that the oil thieves must have a fore knowledge of when the relevant oil company shuts up supply to the pipeline, so they could blow the pipeline.

Although both methods are extremely risky, experts say that the latter is a business for the lion-hearted, as explosions and/or fire is often the outcome, especially when adequate intelligence gathering by the gang was not made to know when the oil company shuts down the supply of crude or refined oil through the high pressure pipeline before blowing it up. The oil thieves have also stepped up their game by running a hose carefully buried underground to connect to a petroleum product or crude-laden pipeline. One of such was the one discovered by the Joint Task Force, JTF, in August 2008 at Eleme, which had direct access to Port Harcourt Refining Company Limited.

In some cases, the hose is used to bunker crude oil into ocean-going barges and vessels for delivery to a number of local and offshore customers in Ghana, China, North Korea, Israel and South Africa, among others. For instance, on Tuesday, May 7, 2012, 22 international oil thieves and four Nigerians on board vessels MT ANE and MT Oxo with 250,000 metric tonnes capacity of crude oil were arrested by the JTF. The 22 non-Nigerians, according to Onyema Nwachukwu, a lieutenant colonel and spokesman for the JTF in the Niger Delta region, were Ghanaians. The arrest, he said, was made following a tip off to the JTF. Earlier, precisely October 5, 2011, the Nigerian Navy in Bonny, Rivers State, also paraded 43 suspected oil thieves who were nabbed on the waterways of Bonny Island with three vessels laden with about 3.5 million litres of crude oil.

Crude oil and refined petroleum product smuggling are also said to be on the upsurge in the Gulf of Guinea, especially on the West African coast between Nigeria and Ghana, with the security forces said to have recovered several barges, canoes, speedboats, large wooden boats (popularly called Cotonou boats by the locals), drums of oil and other container vessels laden with stolen crude oil. Also, the JTF recently claimed that over 500 illegal refineries, which were used to produce poorly refined PMS/petrol, were destroyed in some parts of the Niger Delta. Curiously however, most of the people arrested are never prosecuted to serve as deterrent to others. Reliable industry sources informed the magazine that the oil thieves are usually let off the hook soon after being arrested to shield their sponsors and collaborators who are within the corridors of power.

Sola Owoeye, an economist and former lecturer, Lagos State University, recalls that on August 5, 2003, erstwhile president Olusegun Obasanjo announced in a meeting with South-south traditional leaders and some diplomats that the country was losing over N350 billion a year to oil theft. Owoeye said that the former president went as far as playing videotape in that meeting, which means the government knows where and who is responsible for the crime. He also recalled that Edwin Clark, an Ijaw leader, confirmed that the visuals shown to them at the meeting revealed that the activity is not orchestrated by youths in the oil swamps but by powerful and sophisticated barons capable of marshalling resources like ocean-going oil tankers. “If offenders are caught, nobody hears anything afterwards because they have political pillars that cannot be touched for one reason or the other. It is only the people on the field that are caught and not the financiers of the crime. And if they are not caught, we can’t end the crime,” Owoeye maintained.

But as the oil thieves, otherwise known as illegal ‘bunkerers’ in local parlance, are having a field day pillaging the common wealth, the oil multinationals and the nation’s economy are bleeding profusely. Apart from huge daily losses in oil output and revenue by both oil companies and government, the oil companies have of late been shouting blue murder over astronomical rise in cost of production, even as environmental experts are grieving over the enormous damage to the environment in the form of pollution and consequent destruction of arable land and fishing waters.

Diezani Alison-Madueke, minister of petroleum resources, recently echoed the frustrations of the federal government over the upsurge in the activities of oil thieves, lamenting that government had lost over $12 billion (about N1.86 trillion) to pipeline vandalism and oil theft in the last one year. The minister who spoke at a recent stakeholders’ meeting in Lagos on the rising insecurity in the oil sector explained that while $5 billion was spent in the last one year on pipeline repairs, $7 billion was lost to crude theft.

Going by the minister’s estimates, which some oil and gas experts consider too conservative given the fact most of the thefts are not reported, it means that the country has lost a total of $120 billion to the oil barons in the last 10 years. And with oil as the mainstay of the Nigerian economy, accounting for 95 per cent of its foreign exchange earnings, it is easy to see why the minister and indeed other concerned Nigerians and stakeholders in the oil and gas industry are now agonising. Only recently, Olusegun Aganga, minister of trade and investment, disclosed that a total of N35 trillion is required to actualise the current Transformation Agenda of President Goodluck Jonathan’s administration in the next 10 years. With substantial chunk of the funds required to drive the Transformation Agenda expected to come from proceeds from oil, there are fears already that the activities of the oil thieves may throw spanner in the works.

Major oil companies such as Chevron, Mobil Producing Unlimited, Agip, SPDC, Total FinaElf, and Conocophillips are also grieving over the heavy toll the activities of the oil thieves are having on their operations. SPDC appears to be worse hit, being the federal government’s largest joint venture partner. The oil giant was the first to raise the alarm over the effects of oil theft through bunkering and wilful vandalising of pipelines on its operations and by implication the Nigerian economy. At a recent oil and gas conference in Abuja, Ian Craig, the company’s regional executive vice president, sub-Saharan Africa, lamented that oil theft is impacting negatively on the nation’s potential to increase its daily production. “The greatest challenge is the massive, organised oil theft business and the criminality and corruption which it fosters. This drives away talent, both Nigerian and international, increases costs, reduces revenues to both investors and the government and results in major environmental impacts,” he said.

Craig noted that although the volume of oil, which is stolen, is difficult to estimate, the figure is probably in the region of 150,000 barrels per day, bpd. At the current price of $95 per barrel of crude, it means a total daily loss of $14.25 million, and a total loss of $5.2 billion, an equivalent of N809.6 billion annually. Craig explained that in December last year, for instance, a spill was reported on the Nembe Creeks Terminal, NCTL, caused by two failed bunkering connections. Repairs took a month, with a total production deferment of over four million bpd. “Sadly, as so often happens, thieves used the one-month pipeline depressurisation as a window to install even more bunkering points. Since restart of production in January this year, there have been multiple trips caused by pressure drops resulting from illegal off-take. We have found over 50 bunkering points on the line and associated industrial scale illegal refining with major environmental impacts,” he revealed.

As Attah explained, one of the direct consequences of oil theft on SPDC is the rising cost of running and maintaining its network of pipelines. He said, for instance, that the depth of burying pipelines into the earth has increased significantly, with more personnel and equipment deployed to monitor the several long stretches of oil pipelines. At the moment over 9,000 people have been deployed by the SPDC for routine surveillance of its pipelines. Other oil companies are also deploying large number of people to monitor their pipelines at huge costs. Attah said that his greatest fear however, is that sooner or later it would get to the point where the oil barons would need to protect their business. “That’s why I said it could become a regional risk and then we would begin to see a trend in the mould of the Mexican Cartel. While drugs and narcotics drive the Mexican Cartel, the emerging cartel in Nigeria would be driven by crude oil.”

But government says it is not folding its arms and that efforts are being made to checkmate the escalating cases of oil theft through pipeline vandalism and illegal oil bunkering. “…We are looking at short, medium and long-term solutions to tackle the issue as oil theft is taking its toll on the nation’s economy,” Alison-Madueke disclosed. Part of the solution perhaps is the establishment of a joint oil industry and military task force which, according to the minister, has been saddled with the mandate of eradicating the oil theft menace to ensure the survival of the Nigerian economy. The team is made up of personnel from the oil industry and the military as well as the police force.

Besides setting up the task force, the Nigeria Extractive Industries Transparency Initiative, NEITI, has made a case for a specific law with stringent sanctions and penalties against illegal oil bunkering, oil thefts, illegal refineries and pipeline vandalism. Describing oil theft as an act of economic sabotage, Zainab Ahmed, executive secretary, NEITI, said that a specific law is required to deal with it and urged the National Assembly to pass a stringent law with clearly defined sanctions and penalties to curb the dangerous economic crime. Ahmed who made the call while receiving the House of Representatives Committee on Petroleum Resources (Upstream) on oversight visit to NEITI noted with concerns the increasing rate of stealing of crude oil through illegal oil bunkering in the creeks. As she put it, “The activities of oil thieves, proliferation of illegal refineries, pipeline vandalism, and environmental pollution in the Niger Delta have risen to alarming proportions and become a major threat to the country’s economy.” She told the committee that from the information available to NEITI, the nation’s economy has lost a whopping sum of $4.3 billion (N669.5 billion) to oil thefts in the last two years at an average rate of $2.3 billion (N358 billion) annually. This is at variance with the figures earlier quoted from the minister and the oil company, two parties that are directly involved in oil exploration and exploitation, and which should know.

Earlier, NEITI said it had come out with a metering technology capable of determining the exact volume of crude pumped from oil terminals. Unfortunately, the technology appears to be dead on arrival, as sources close to the agency say it was not well received by the industry, particularly NNPC and DPR. However, a DPR official who spoke with the magazine described NEITI’s proposal as ‘hilarious’, noting that the metering technology is fraught with a myriad of challenges. Hear him: “Plugging a meter to oil wells? That is hilarious. If a meter were to be affixed to oil wells, it would be difficult to calculate the total amount of crude oil, because in the process of crude oil exploration, three things are involved. You have water, gas and crude oil. Does that mean that we will get a separate meter for water, gas and oil? That is the question to be answered.”  If that is impossible because crude exists with other properties, how then does Nigeria determine the volume sold to the international market?

Yet for the DPR source, the only way forward is for government to display a high sense of sincerity in addressing the crude oil theft menace. “The government must show that it is sincere in its fight against crude oil theft. The people that are in this business are not the ordinary people you see on the street. They are well connected and, so often, have access to the corridors of power. In the light of this, the federal government must display a high sense of sincerity because the DPR has on, several occasions, written reports that were ignored by the people in authority,” he said, adding that continuing to play the ostrich by paying lip service to the fight is but an ill wind that will continue to blow no good to the national economy.

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About TransformationWatch

TransformationWatch is an online news site founded by Henry Omoregie It is focused on keeping tabs on the Transformation Agenda set out by the Nigerian leadership in the Local, State and Federal Governments. My mission is to observe, analyze and report milestones or slowdowns in promised service delivery in all the facets of governance in Nigeria (2011 and beyond). Readership is open to all Nigerians and friends of Nigeria alike, regardless of Tribe, Religion or Political divide. We are all in this together


One thought on “How They Steal the Nation’s Oil

  1. In as much im not supporting illegality, what do you expect, when the oil wealth is not judiciously utilised for the well-being of every Nigerian, rather you hear billions of dollars from oil proceeds ending in the accounts of some highly placed govt officials, and politicians (cartels). Why re they not prosecuted and punished? We as a people of that region are disappointed and ve lost confidence in the govt, petroleum minister, judiciary, etc. So it is free for all.

    Posted by Tony nwanze Utulu | June 10, 2012, 5:41 pm

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