Nigeria’s Crude Oil Theft: Shell Et’al And Their Half Truths

                                                                      Even Nigeria’s federal government knows and had publicly acknowledged that Nigeria on a daily basis loses huge volumes of its produced crude oil to thieves thriving unhindered across the country’s coast lines especially in the Niger Delta and Lagos areas.

However, a recent announcement by Nigeria’s biggest foreign operator in the oil and gas industry,Shell Petroleum Development Company of Nigeria (SPDC,) in a 2010 briefing states that the country has continued to lose billions of dollars.
Significant volumes of the country’s crude oil production has been lost to thieves that thrive in the illegal export of the commodity, smacked of insincerity on the side of the foreign operating oil companies.
The federal government’s deliberate indifference to tackle the problem which out rightly falls within the purview of financial crimes and crimes against humanity, as it imparts indirectly on the lives of the already battered Nigerian masses, also called to question the sincerity of our leaders and our seriousness as a nation.

The story: Massive theft of crude oil from producing companies’ facilities especially flow-lines in the onshore and near-shore Niger Delta has increased despite a reduction in violence by militants in the area.

Apart from losing volumes of produced oil and at a condensed valued of several millions of dollars on a daily basis, the activities of the thieves leave the production facilities of these oil companies in a constant state of disrepair thereby incurring huge maintenance cost on the NNPC joint venture partners.

The activities of these thieving groups also result in large oil spills and the consequent impact on the environment.

Shell stated in its briefing notes that its operations in 2010 alone suffered 155 reported incidents of crude oil theft that involved vandalism, oil spills, and fire.

According to the company, “Barges take stolen oil to tankers waiting offshore for export. There is also a massive illegal refining business based on stolen crude oil. All this has reduced the amount SPDC is producing, created environmental and social problems from oil spills and reducing the government’s revenue that could have been used to develop infrastructure and services.

It is interesting that the government seems to be looking the other way while this heinous crime against the collective good of this nation goes on daily with such impunity that makes it look as if the government – and the people are the ones directly involved.

From all indications, both the government and the foreign operators may not be telling us the whole truth.

For instance, Shell in its briefing note said actual amounts of crude oil stolen in 2010 from its facilities in the Niger Delta was not certain because of disharmony in figures advanced by various sources. This was an outright deception by Shell.

The question is: which other source does the company depend on to get exact figures of its crude oil production and thus extrapolate the exact volume lost to thieves?

This was where the deceit came in, in the supposed revelation and Shell is not alone in this mischief.

All major operators in Nigeria are guilty of this corporate delusion either because of their complicity in the entire business of crude oil stealing or inappropriate accounting for extracted oil. Except that they are afraid of implicating highly-placed individuals in and outside the government, how can these companies pretend not to know how they loose volumes of oil on a daily basis to thieves. Also where is the final destination of the stolen oil?

Shell said that, in 2010, it produced an average of 960,000 barrels per day (bpd) of oil. So the question is: was that the cumulative volume the company expected from all its producing wells? If not, the difference would have given an idea of the actual volume lost to oil thieves.

All oil producing companies including Shell must know the exact volume that comes out from of their oil wells except if the well is shut-in (closed). If they know what they produce from all the wells within their oilfields, they should with exactness know the volume expected to arrive at every flow station before going to the export terminals.

The oil wells were completed to flow at given and definite rates whether steady or staggered. The difference between what comes out from battery of wells in any field and what arrives at the flow station will give the exact volume of produced crude oil lost between the wellhead and the flow station. This is a simple enough calculation.
If the stealing occured at flow lines rather than wellheads, the same calculation goes for the gap between the volume at the flow station and whatever quantity is received at the export terminals.

So what is difficult in working this out? The Nigerian people need to know the actual volumes stolen on daily basis so that they can in real terms appreciate the enormous loss this nation incurs on a daily basis to a few privileged individuals or gangs.

Operating oil companies particularly those that have onshore/near-shore production facilities have maintained that crude oil stolen from their facilities were normally taken by tampering with flow lines except in few cases where wellheads were directly tapped. So let’s begin to tell ourselves the bitter truth.

Both the federal government’s representative in the oil business,the NNPC and the foreign oil companies know what they are doing. This is the truth.

The issue of crude oil theft or rather inappropriate accounting of produced oil was part of the mischief played into what is now called the “final” Petroleum Industry Bill (PIB). This bill is currently at the National Assembly awaiting passage into law and ultimately Presidential assent.

This problem has been previously highlighted in a published piece: “Ambushed PIB: Mischief Vs Genuine Oil and Gas Reform,” where it was stated that the spirit of genuine reform in the nation’s oil and gas sector has been compromised by those who have been partnering to jointly defraud Nigeria.

From the original PIB, the proposal to measure crude oil production volumes at wellheads rather than at distribution terminals was criminally expunged so that oil-producing companies can continue to tell us that half the volume they produced was lost to oil thieves along the road to the export terminals.

If the proposal was not clandestinely removed, it would have undoubtedly ensured transparency in crude oil volume accounting and effortlessly expose the reckless thievery of producing crude oil in this country.

Over five percent of the country’s total crude oil outputs are estimated to be stolen from Nigeria’s Niger Delta every day, plus the additional volumes used as feedstock for over 100 village-level illegal refining businesses that are booming unhindered across the oil-producing areas.

The case of condensate is even worse, as most people do not even know that this resource is produced in this country almost as much as oil is and interestingly, as is the practice, condensate is not part of the calculation for Nigeria’s OPEC daily production quota allocations.

Nigerian security agencies in 2010 alone arrested 187 people and seized 20 tankers, 28 barges and 38 other boats used in transporting stolen crude oil to the oil tankers stationed offshore.

The question is Who are these people and who are they working for? Every tanker, boat or barge is well registered somewhere in this country or even outside. So whomever owns these vehicles and the village-sized oil receptor marine vessels/tankers receives Nigeria’s stolen crude oil farther offshore from our coastline.

Does it mean that the security agencies do not interrogate those arrested, if for nothing than to gather intelligence to help unravel the real culprits behind these illicit businesses.

As we are even talking now, crude oil is being lost from onshore and near-shore production facilities. Nobody has ever bothered to find out what is happening at the several floating production and storage facilities scattered in the nation’s offshore arena.

Neither does the Department of Petroleum Resources (DPR) nor NNPC (NAPIMS) have any clue as to what actually goes on in the nation’s offshore oil production and storage platforms. Is this not pathetic?