Nigeria: Why Oil Theft in Nigeria May Not End Soon - NEITI

12 November 2019

Abuja — The Nigeria Extractive Industries Transparency Initiative (NEITI) has given possible reasons why widespread theft of Nigeria's crude oil and refined petroleum products may not end soon.

NEITI, which recently disclosed that approximately 488.6 million barrels of crude oil and 4.2 billion litres of refined petroleum products worth $40.06 billion and $1.84 billion respectively were lost by the country between 2009 and 2018, explained that a number of existing reasons and challenges suggest the practice could go on for a while.

It hinted that already, the numbers for stolen oil in the first quarter of 2019, surpassed the total volume stolen in 2018 alone, by about 30 per cent, adding that the final figures for 2019 could be higher.

However, it explained that the factors which suggest oil theft may go on for long in Nigeria were the lack of adequate metering devices at appropriate oil production points, positive markets for refined and stolen crude oil, poor legal systems to punish culprits of oil theft, as well as the size and remote positions of Nigeria's petroleum infrastructure which makes it difficult to secure.

NEITI stated that parts of the solution to tackling oil theft in the country would be to take advantage of current technology to monitor and track Nigeria's crude oil from production facilities to the point of sale.

It also noted that the legal framework would need to be strengthened, "because current provisions of the law are clearly not sufficient to provide deterrence for beneficiaries of stolen crude."

"Ultimately, an effective strategy to combat crude theft would require multilateral actions, at the international level, to complement routine legal, regulatory and law enforcement activities by national institutions.

"Nigeria currently relies on operators to provide data on crude production and crude losses. These figures are not independently verified by government agencies. The situation creates opportunities for possible understatement of production or export figures, which may simply be attributed to theft and vandalism," it said.

According to the organisation: "In terms of the size and extent of the infrastructure from which crude oil is stolen, Nigeria has about 4,441 kilometre (km) length of pipelines conveying crude oil and 5,120km for refined products.

"This is in addition to 124km and 164km for condensates and liquid petroleum gas respectively. There are also about 2,000 wellheads spread across 258 oil fields. The vastness and remoteness of Nigeria's network of pipelines and oil installations, mostly in very difficult terrains, no doubt presents its own challenge to effective policing of these assets and the products they convey from points of production to sale destinations. This makes them vulnerable to activities of thieves and vandals."

With regards to market for stolen crude and refined products, NEITI stated that the market incentive for stolen oil could be analysed in two parts, the first being rise in volume of theft corresponding with significant rise in international crude prices.

"This is largely a supply-side factor that increases the vulnerability of the producing country in direct proportion to price movements. The second dimension of the role the market plays in incentivising oil theft is found in the considerably lower prices which oil thieves are willing to sell their products to middlemen and end users.

"Very low capital costs, coupled with zero taxes and royalty payments, means that cost recovery threshold and hence the price for stolen crude is quite low. In practical terms, crude oil thieves can sell their products at half the market price and still make a significant profit. The added incentive of almost zero transaction cost offered by spot market conditions makes the market for stolen crude very attractive for buyers," it added.

Also, for refined products, it explained that suppliers of stolen crude oil profit from the existence of illegal refineries which produce and supply 'black market' fuel especially, but not confined to, the local market for petroleum products.

On what the eventual scenario for 2019 may be, NEITI said: "It is important to point out that, while 2018 produced the lowest volume of crude loss and also shows a second consecutive decline from the peak of 2016, the current year (2019) appears set to dispel any real hope of a sustained decline in crude loss.

'This is already apparent from the figures released by the NEC committee - the reported volume of 22 million barrels for the first six months has already surpassed the entire loss for 2018 by almost 30 per cent. There is no question therefore that urgent measures are required to reverse this pestilence."

See What Everyone is Watching

More From: This Day

Don't Miss

AllAfrica publishes around 700 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.