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FG’s New Alliance Against Crude Oil Theft and Smuggling

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By ChibisiOhakah, Abuja

The fight against crude oil thieves in Nigeria took a stronger dimension last week (Wednesday June 23) when the federal government inaugurated a Task Force consisting of industry stakeholders in the downstream sectors, as well as critical security agencies in Nigeria. 

Members of the Federal Government Task Force include, from the side of the government, the Nigerian National Petroleum Corporation (NNPC), the Economic and Financial Crimes Commission (EFCC), the Department of State Services (DSS), Nigeria Police Force (NPF), Nigeria Customs Service (NCS), Nigeria Security and the Civil Defence Corps (NSCDC).

Others are Major Marketers Association of Nigeria (MOMAN), Depot and Petroleum Products Marketers Association of Nigeria (DAPPMA), Independent Petroleum Marketers Association of Nigeria (IPMAN), Petroleum Products Retail Outlets owners Association of Nigeria (PETROAN), Nigerian Association of Road Transport Owners (NARTO), and the Petroleum Tanker Drivers (PTD).

Speaking to the partners during the inauguration, the group managing director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, said President Muhammadu Buhari’s mandate in setting up the task force is simple: “to curb the twin menace of petroleum products smuggling and crude oil theft which are negatively impacting the nation’s economy.”

He said the President has mandated the Ministry of Petroleum Resources and the security agencies in the group to do everything to stop crude oil theft and illicit truck-out of petroleum products which he described as major economic crimes that have hindered Nigerians from enjoying the benefit of subsidized petroleum products.

Industry stakeholders are to collaborate with the Corporation to ensure that the daily national petroleum products consumption which shot up to 102million litres in the month of May is brought down to realistic levels around 60million litres. Melee revealed that the volume of premium motor spirit (PMS) distributed inside the Nigerian value chain is not consumed by Nigerians alone. 

“We all agree that smuggling is not a business that should be condoned because even for deregulated petroleum products, it brings extra cost burden on this country both in terms of safety and security of supply and in securing of foreign exchange. It even constitutes more burdens to this country when the product involved is a regulated product like Premium Motor Spirit (PMS),” Mallam Kyari submitted.

He explained that with the increasing price of crude oil at the global market and the OPEC+ production cuts, Nigeria cannot afford to shoulder the cost of smuggling. “We all know that our daily consumption is not up to 60million litres. We all know that, and that is why we have to pull it down. We will pull it down by every means necessary,” Kyari assured, stressing that the NNPC would emplace Advanced Cargo Declaration in line with global best practices to tackle the issue of crude oil theft in the country.

Last February, Nigeria announced that it was losing 200,000 barrel of crude oil daily to theft and vandalism. In that month, Nigeria’s grade of crude oil Bonny Light rose to $64.3 per barrel in the international market. It was explained the 200,000 barrels per day losses resulted from sabotage on pipelines and illegal pilfering by thieves. The figure, the apex oil corporation stated further, represents a quantum leap compared to the industry average of 70,000 b/d of crude output lost to theft as of August 2020.

Overwhelmed by the situation, Melee had sought help from the Chief of Army Staff, Major General Lucky Irabor in February. He asked the military to help in curbing frequent attacks on pipelines and large-scale siphoning of the crude. “We have two sets of losses, one coming from our products and the other coming from crude oil. In terms of crude losses, it is still going on. On average, we are losing 200,000 b/d,” Melee confessed.

Irabor had pledged to increase military support to provide maximum security for Nigeria’s oil and gas assets.  But the inclusion of organized, industry stakeholders like the Petroleum Products Retail Outlets owners Association of Nigeria (PETROAN), in the Task Force on Wednesday is a potent conclusion that the army-alone strategy failed

The President of PETROAN, Prince Dr Billy Harry, commended the minister of state, petroleum, Chief Timipri Sylva for harkening to “the advice I had been drumming to the ears of anyone who cared, that the critical stakeholders must but involved in the fight against vandals and oil thieves. We understand what are involved. We shall provide our maximum support to ensure that this exercise is a success this time around,” the PETROAN president who spoke on behalf of his colleagues   

Oil remains the driver of the Nigerian economy, yet the country has lately seen its earnings badly hit due to slump in crude and condensate production and lower prices in the international market.

There have been talks that oil thieves and pipeline vandals had been mostly successful because of poor and decaying infrastructure. In 2019, Nigeria’s oil industry monitor and auditor, the Nigeria Extractive Industries Transparency Initiative (NEITI), released a report showing that Nigeria lost about 138,000 b/d of crude oil to theft over the past 10 years valued at $40.06 billion.

Also speaking during the inauguration, the executive chairman of EFCC, Abdulrasheed Bawa, expressed the readiness of the Commission to work with the NNPC and other stakeholders to ensure that all those involved in the economic sabotage were brought to book.

Activities of militants in the oil rich Niger Delta have been severally blamed as precursors to pipeline vandalism and oil theft; but it appears that the emboldened, monumental insecurity in Nigeria today, which has elicited fresh onslaughts in the critical oil pipeline areas, is aiding vandalism and oil theft, even as the country’s security agencies appear to be generally overwhelmed with the situation.

Foreign oil companies, including Shell, ExxonMobil, Chevron and Total have linked their divestment in many onshore assets to the continued oil theft and pipeline vandalism. Oil facilities have faced incessant sabotage attacks over the years while some others have aged, giving rise to frequent failures resulting in operational disruptions, high maintenance costs and revenue losses.

Early this year NNPC called for bids from local and foreign investors to finance the construction and repairs of its crude oil and petroleum products pipelines. The Nigeria’s apex oil corporation has not come up with the status or outcome of that exercise. NNPC runs a network of over 5,000 km of pipelines across the country that transport crude produced by foreign partners and also refined oil products that are imported.

Nigeria who is Africa’s largest oil producer saw its output fall steadily in the second half of last year as it came under pressure to make hefty cuts as part of its OPEC+ obligations. Nigeria has the capacity to produce around 2.2 million b/d of crude and condensate, but it pumped around 1.72 million b/d in 2020, according to S&P Global Platts estimates. That is the lowest output since 2016 when Niger Delta militants repeatedly attacked key oil infrastructure pushing production to as low as 1.4 million-1.5 million b/d that year.

Militancy in the Niger Delta remained largely dormant in the past few years. But occasional threats from grumbling youth groups over various socio political and economic issues relating to the region are still hanging in air, providing concerns the new task force will also contend with. Observers say the Nigerian security architecture nationwide, and especially in the areas housing the oil pipelines, must be strengthened beyond their present forms, to achieve desired results

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