Nigeria is unable to meet its Organisation of Petroleum Exporting Countries (OPEC) monthly oil production quota in over five years, no thanks to oil theft, which continues to thrive in the country. And with a daily loss to this nefarious act estimated at 400, 000 barrels, fears are rife that if left unchecked, Nigeria may sink further into revenue insolvency. MUYIWA LUCAS writes.
An August 7, MV HEROIC IDUN, a super tanker with International Maritime Organisation (IMO) number 9858058 and Maritime Mobile Service Identity (MMSI) number 538008422, with 26 crew members comprising 16 Indians, eight Srilankans, a Polish and one Filipino, was spotted around the AKPO Deep offshore oil field operated by a multinational oil firm, at midnight. The vessel has the capacity to lift about three million barrels of crude oil.
Akpo field is located in Block OML 130, 200 kilometres offshore Nigeria in 1400 metres water depth.
At plateau production, Akpo produces 175,000 barrels per day (bbls/d) of condensate and exports 320 million Standard Cubic Feet per Day (mmscfd) of gas to Bonny NLNG plant. Akpo reservoirs contain 620 million barrels recoverable reserves of a critical fluid made of very light oil up to 53° API and classified as condensate, with wellhead shut-in pressures up to 400 bars, wellhead temperatures up to 116 °C and very high Gas Liquid Ratio (GLR). AKPO is not only a giant condensate field, but also a gas field with one trillion cubic feet (Tcf) planned gas export.
Although it is not strange to find such tankers around offshore areas given the nature of the business around such a facility, MV HEROIC IDUN’s mission on that fateful day was suspect. The vessel, built on July 1, 2020, was seen through the NN’s Maritime Domain Awareness (MDA) facility, prompting NNS GONGOLA to establish communication and interrogate the vessel.
The interrogation revealed that the vessel, alleged to have entered the Nigerian waters to load crude oil products, neither had the Nigerian National Petroleum Company Limited’s (NNPC) loading permit, nor valid documents to be in the country’s waters. Consequently, the vessel, registered under the flag of Marshall Island, was directed to proceed to Bonny Fairway in Rivers State for further interrogation and Vessel Boarding Search and Seizure (VBSS) by the Nigerian Navy.
Rather than comply, the vessel increased its speed and changed its direction facing Sao Tome and Principe to escape. However, five days later, the vessel and its crew met their waterloo in Equatorial Guinea, as they were arrested by the Equatorial Guinea’s Navy, following an intelligence report supplied to the country by the Nigerian Navy (NN).
For decades, oil theft has been a source of concern to many. Crude oil, the mainstay of the economy, accounting for over 90 per cent of her revenue earnings, has been under siege of saboteurs for decades.
The menace reached a crescendo last week following a disclosure that an estimated 400, 000 barrels of crude oil worth over $40 million is stolen daily. The continued theft of this product has left the country losing out from benefiting from the high global prices of oil, whose effect has led to fiscal pressure on the economy as a result of declining revenues and soaring public debt.
The Minister of State for Petroleum Resources, Dr. Timipre Sylva, described the development as a “national emergency,” adding that this has led to the nation falling short of OPEC daily quota of 1.8 million barrels to 1.4 million barrels.
He warned that such huge economic loss was capable of crippling the nation’s economy, if not given the seriousness it deserved, regretting that the situation has persisted despite the efforts by the Federal and state governments to arrest it.
So worrisome has the situation become that eggheads at the Nigeria Economic Summit Group (NESG) and stakeholders at the Annual General Meeting (AGM) of Oando Plc, urged the government and other stakeholders to take more decisive actions to tackle the problem of oil theft, even as they rued its negative impact on the country.
In similar vein, shareholders of Oando Plc at the end of the Annual General Meeting in Lagos urged the government and other stakeholders to take more decisive actions to tackle the problem of oil theft, bemoaning the negative impact of oil theft and insecurity and calling for cohesive actions to tackle the menace.
The country’s oil production output has been on the decline due to theft, shut-ins, among others. In its Commodity Markets Outlook report for March, this year, the World Bank said Nigeria had the largest shortfall among oil-producing countries during the first quarter, a development it attributed to sabotage within the oil production system and other factors. The global finance body put the shortfall then at 500,000 barrels per day, coming ahead of Angola and Russia both with a shortfall of 300,000 barrels per day.
Yet, reports by the Organisation of Petroleum Exporting Countries (OPEC) show that the country lost about N1.22 trillion to crude oil deficit in the first quarter of the year. According to OPEC, the country lost about 22.658 million barrels of crude oil between January and April. The reports released in the last four months showed that Nigeria did not meet its OPEC oil production quotas in January, February and March.
The reports indicated that OPEC approved 1.683 million barrels per day as the country’s crude oil production quota in January, while the organisation approved 1.701mb/d and 1.718mb/d for the country in February and March, this year.
In its April Monthly Oil Market Report, OPEC observed that Nigeria’s oil production from secondary sources in January was 1.413mb/d, which dropped to 1.378mb/d in February and declined further in March to 1.354mb/d.
Analysis of the figures showed that the country fell short of the OPEC approved quota in January by 270,000 barrels daily, indicating inability to produce 8.370 million barrels to meet its approved target for the month.
Similarly, in February, Nigeria’s daily crude oil production loss viz-a-viz OPEC approved quota was 323,000 barrels, which amounted to 9.044 million barrels for the month. Likewise in March, the daily oil production of Nigeria was 364,000 barrels below OPEC approved quota. This, therefore, means that Nigeria’s crude oil production in March was 11.284 million barrels lower than its expected production quantities. The implication of the deficit was that in the first quarter of the year under review, Nigeria failed to produce 28.658 million barrels of crude oil to meet its production quota as approved by OPEC.
Still, OPEC noted that the country’s crude oil production fell by 744,000 barrels in March 2021, while in August of same year, the country managed a paltry 1.23mbpd, which was a major drop from the 1.32mbpd it produced a month earlier, while it produced 1.246mbpd in September and 1.227mb/d in October. This was at a time when the country had 1.6mbpd as its production output target.
Which way to go?
An economic analyst and Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Muda Yusuf, submitted that oil theft had been thriving because of the failure of the state (government) and its institutions, adding that oil theft is a process that demands enormous logistics, planning and execution.
According to him, while other oil producing countries are celebrating the oil price windfalls, Nigeria’s economy is inching closer to the brink as it grapples with a serious fiscal crisis, weakening foreign reserves, growing debt and depreciating exchange rate.
Describing the situation as “pathetic”, Yusuf emphasised that “this scale of criminality cannot happen if the institutions of state were not compromised”.
He regretted that several investors had exited the country because of the crass impunity of oil theft and vandalism of oil installations.
This, he further said, had made it difficult to attract major investors to the upstream segment of the industry given that the risk of investing here is very high when compared to other oil producing countries.
“How else can one explain the level of impunity that this phenomenon represents? It takes hours, if not days, to load the vessels with this stolen crude. Yet, we have no framework to curb it.This is a product of a grand conspiracy and economic sabotage,” Yusuf told The Nation.
Yusuf, however, noted that the government had belatedly taken some steps to address the problem, praying that the efforts would be sustained.
Last week, determined to tackle the oil theft embarrassment, the Nigerian National Petroleum Company Limited (NNPC) launched what it called ‘Crude Theft Monitoring Applications on the sidelines of the signing of renewed Production Sharing Contracts (PSCs) agreements between NNPC and its partners in oil mining leases.
The portal, with the address ‘stopcrudetheft.com,’ has application options for reporting incidences, with prompt follow up and responses and another one for crude sales documents validation.
The Group Chief Executive Officer (GCEO), NNPC Limited, Malam Mele Kyari, noted that “vandals” actions on pipelines had become a difficult to deal with, a reason it engaged partners to assist it
Kyari said international refineries where the stolen crude could be taken to have obligations to ensure they bought Nigerian crude from credible sources which could be validated. He said if such refineries refused to do that, they would be held responsible as part of the culprits involved, urging that in the international arena, companies must report suspicious sales.
He said every product that left the country must have a unique registration number by the NNPC and validated by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
The Publisher, Africa Oil+Gas Report, Mr. Toyin Akinosho, however, said political will was also needed to check the menace of crude oil theft and pipeline vandalism.
“It’s very important that the state hydrocarbon company itself is announcing this. However, it is not just a question about tracking; it is actually how you deliver on ensuring that those incidents don’t happen again,” he said, adding: “There has to be the will power to deliver.’’