Governor declares war on Nigeria’s $7bn oil theft

Africa’s biggest oil producer loses as many as 150 000 barrels of crude per day to criminals.
Image: Bloomberg

A governor in one of Nigeria’s crude producing states has declared “total war” against rampant oil theft and illegal refining that’s costing the country billions in lost revenues and contributing to environmental pollution.

The pilfered crude is turned into gasoline, diesel and kerosene in makeshift refineries that have proliferated in the cover provided by the creeks and forests of the Niger Delta region. “It is sabotage to the nation’s economy and very dangerous to the health of the people,” Nyesom Wike, the governor of Rivers state, said in an interview. “We cannot sit down and see our people dying with all kinds of ailments,” he said in Port Harcourt, the state capital.

Africa’s biggest oil producer loses as many as 150 000 barrels of crude per day to criminals that tap into the pipelines crisscrossing Rivers and other southern states, the government estimates, with much of the haul ending up at the informal refineries. At current prices, the missing barrels are worth almost $6.8 billion a year. Some industry figures say the scale of the stealing is even worse.

Theft has contributed to “abysmally low” oil production, Nigerian Chief of Defence Staff Lucky Irabor said on February 19. The country, with a capacity of 2.5 million barrels a day, only produced about 1.5 million barrels a day of crude equivalent in December, down from around 1.7 million barrels at the start of 2021, according to government data. Despite a modest improvement in January, performance remains below the quota set by OPEC+ for Nigeria. Oil theft both erodes current output and discourages investment in future production.

For more than a decade, international companies including Shell Plc and Chevron Corp. have been selling onshore and shallow water permits to local producers such as Seplat Energy and Heirs Oil & Gas, partly to reduce their exposure to regular disruptions.

“It is clear that certain politicians are involved” in the illicit trade said Wike, who is a leading member of the main opposition Peoples Democratic Party. “It’s also clear that some security agencies are involved,” he said. The federal government run by President Muhammadu Buhari has failed to tackle oil theft, forcing Rivers state’s administration to act, the governor said.

Spokesmen for the military, presidency and ministry of petroleum resources didn’t respond to requests for comment.

One of the most visible consequences of the manufacturing and consumption of products from the numerous refineries is air pollution known as “black soot” that lingers over Port Harcourt and surrounding areas.

“If you don’t destroy the heart of the activity, which is the illegal refining centres, then the crude will continue to be cooked and the soot will still be in the air,” Samuel Nwanosike, chairman of the Ikwerre local government area in Rivers state, said during a tour of disabled sites.

Having enlisted the assistance of the Nigerian military, task forces created by Wike began dismantling refineries in January. While data for the whole of Rivers was unavailable, chairmen of three of the state’s most affected local government areas said they have destroyed at least 428 ovens used for “cooking” crude. In the four weeks to February 24, the armed forces also excavated 85 pipes that were “illegally connected to pipelines,” according to a military statement.

Two men in the refining business said Wike’s campaign has stopped them from operating. However, both said they plan to resume their former activities when possible due to a paucity of options offering a comparable income in a country where more than half of working age adults were unemployed or underemployed at the end of 2020, according to government data.

“Even if there’s a lack of jobs because of the economic policies of the ruling party, should I allow crime to take place?” Wike said. “No, certainly not.”

© 2022 Bloomberg

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