26 February 2013

Nigeria: The Menace of Oil 'Bunkering'


The 13th Nigeria Oil and Gas Conference that ended recently in Abuja again highlighted some of the lingering problems in the sector. One of these is the issue of oil theft 'bunkering' -breaching pipelines to steal crude then refine it locally or selling it abroad. Nigeria depends on oil for some 80 percent of its revenue and about 90 percent of its foreign exchange earnings.

Apart from depriving the government of much-needed revenue, oil theft accentuates the environmental pollution in the Niger Delta region caused by damaged pipelines that are often left to spew oil for days afterward. Environmental pollution caused by decades of oil exploration and gas flaring is one of the contributing factors to militancy in the region as polluted waters of the area drive local farmers and fishermen into joblessness, creating anger among them. It is for this reason that it is part of the responsibility of statutory agencies tasked with developing the Niger Delta and the governments of the region that receive additional 13 percent derivation money from the Federation Account, to tackle the threat posed by oil 'bunkering'.

Issues arise as to whether the federal authorities are doing enough to combat the menace; and whether the annual N5.6bn contract that the government ill-advisedly gave former Niger Delta militants to protect oil pipelines and other security measures has yielded any value.

Opinions differ. The Group Executive Director, Exploration and Production, Nigerian National Petroleum Corporation (NNPC), Abiye Membere, claimed that the country's total crude loss to 'bunkering' activities had dropped from 150,000 barrels per day to 80,000bpd towards the end of 2012 -suggesting that the government's security measures are working. Ian Craig, Africa vice president for Shell Exploration and Production noted that while militant attacks on oil installations in the region have slowed due largely to the 2009 amnesty programme to some 26,000 militants in the Niger Delta, oil theft has surged. It is clear however is that oil 'bunkering' remains a major challenge, with the country estimated to be losing over $1 billion annually to the oil thieves.

Minister of Petroleum Resources, Mrs Dieziani Alison-Madueke, said that President Goodluck Jonathan was reaching out to other world leaders to seek ways of recovering proceeds from the sales of stolen crude oil, which she described as 'blood money'. However in an apparent swipe at the government's recourse to outsiders for help, the Managing Director, Shell Petroleum Development Company (SPDC), Mutiu Sunmonu, provide a more sensible advice that the government should instead consider looking inwards and moving against what he said were the 'principalities and powers in high places' behind crude oil theft in the country.

A more effective strategy would be to adopt an aggressive multi-pronged approach, which will focus as much on the supply side as on the demand side of the illegal trade. On the supply side for instance, there is no doubt that the 'bunkerers' in the Niger Delta are more like street hawkers of illicit drugs, usually small couriers to the big barons behind the trade. Unless the government develops the necessary political will to go after such barons behind the menace, the problem of oil theft will persist. Similarly, there is a need to do something about the country's legal refineries, which have been left largely below-capacity by decades of mismanagement and corruption, creating local demands that the oil 'bunkerers' try to meet amid claims that oil majors are being paid some $13 billion annually for years to increase production and build reserves - without either being delivered. Additionally, there is a need for a more vigorous attention to be paid to the underlying sociological reasons that make 'bunkering' to be a thriving alternative. Here, good governance in the region, proper and effective utilization of the huge resources earmarked for the region and a certain re-orientation of the 'bunkerers' would help. On the external demand supply side, it is a wonder that the Nigerian Navy, which should protect the nation's coastal waters, has not sunk at least one of the ships involved in ferrying the crude from the criminals to overseas as a way of sending a powerful signal to others that the authorities mean business.

The government needs to do much more than it currently does to combat the incidence of oil theft and its attendant leakages.

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