Why crude oil losses persist despite huge surveillance contracts

According to him, available records show that it was only Mr. Government Ekpemupolo that was consistent in the execution of the contract.

“It is not enough to give contract to militants who will end up enriching themselves. You must have a mechanism that makes majority of communities where these facilities are located to benefit from the existence of those facilities in those communities. If not, problems will keep recurring. The first security is security by the community not by a few people,” he added.

An international security expert who pleaded anonymity explained that vested interests in government have continued to frustrate the award of surveillance contracts to Israel’s Rafael Technologies to protect the almost 12,714km of oil and gas pipelines in the Niger Delta.

“I know Rafael Technologies, which has interacted with past NSAs has this surveillance technology that can see all the pipes, even at night, and know where is ruptured. Approving the deal will therefore, expose some other things.

If the Israeli firm starts surveillance, it will uncover a lot of things. That is why the firm is not going to be given the approval. There is serious collusion,” he alleged.

On his part, Mr. Anyakwee Nsirimovu, who was a member of the default Technical Committee on Niger Delta, regretted that government failure to implement their recommendations was partly responsible for the oil theft.

He added that the Department of State Services (DSS) had presented a list of persons involved in oil theft to the committee, but the government failed to act on it.

Shell alone with a network of approximately 4,000 kilometers of oil and gas pipelines and flow lines said crude oil theft it experienced on its pipeline network resulted in a loss of around 11,000 barrels of oil a day in 2018, which was more than the approximate 9,000 barrels a day in 2017.

A report of the Nigeria Natural Resource Charter (NNRC) stated that in 2016, about ₦3.8t was recorded as losses from crude oil theft, sabotage and pipeline vandalism.

The report also noted that oil companies are partly to blame for these losses as they sometimes under-declare production to avoid paying petroleum profit tax. It would be recalled that in 2016, the Federal Government sued Shell for $407m for under-declaring between 2013-2014. There were also 15 separate suits against 15 other oil companies for $12.7b.

The NNRC findings revealed that between 2003 and 2013, there was a total of 15, 685 pipeline breaks caused by vandalism. Usually, small ships anchor near pipelines, drill and siphon crude, which is then taken to larger oil tankers on the high sea. The stolen oil is normally sold in the international market.

With no solution to pipeline vandalism and stolen crude in sight, the implementation of the country’s annual budget, improving the nation’s revenue base, as well as executing other developmental plans may still remain elusive.Some stakeholders insist that the lack of synergy between oil host and impacted communities and the NNPC, as well as the lack of local ownership and buy-in by the communities may continue to frustrate any attempt to address the situation.

The NNPC’s Monthly Financial and Operations Report (MFOR) disclosed that oil and gas pipeline vandalism rose by 77 per cent in June this year with as much as 106 pipeline points breached as against the 60 points vandalized the preceding month. Apart from loses by International Oil Companies (IOCs) and indigenous firms, the development in 2017 led the NNPC to deduct N25b and another N130.4b from the nation’s oil revenue for crude and product losses, pipeline repairs and maintenance before crediting into the federation.

Managing Director of Aiteo Group, a firm, which operates one of Nigeria’s strategic pipeline; Nembe Creek Trunkline (NCTL), Victor Okoronkwo, recently told journalists that vandalism has cost the company losses of about $2b in the last four years.

While the nation’s economy is just healing from recession, these sort of leakages, according to the Director, Centre for Petroleum, Energy Economics and Law (CPEEL), University of Ibadan, Prof. Adeola Adenikinju if not urgently addressed may create significant headwinds for the weakened economy.

“This is occurring at several levels. First, it impacts negatively on federally collected revenue. Our budget is based on projected oil price and oil production. Theft reduces the volume of oil exports and government revenues.

This impacts the ability of government at all levels to perform their fiscal responsibilities, including the level of public investments,” Adenikinju, who is an energy economist, said.

While NNPC had planned to increase crude oil reserves by one billion barrels yearly, and bringing the reserves to 40 billion barrels by 2020, it earlier this year changed the projection to 2025. But with the rate of attacks, Adenikinju insisted that the projection could remain unrealistic.

The Chairman of Petroleum Technology Association of Nigeria (PETAN), Bank-Anthony Okoroafor, said there was need for an integrated approach involving the host communities and all the people that have direct impact on oil pipelines.

“People around the area are the first and primary line of defense for the pipeline. Somebody will know that something will happen. We can put them on monthly rentals to protect the pipelines; a rent aligned with success-based incentives and transparent and accountable needs-based community development”.

To sustainably address the menace, Okoroafor called for a change in the relationship between government, oil companies, and communities.Dr. Ndubuisi N. Nwokolo, Team Lead (Research and Policy), Nextier SPD said oil pipeline securitisation has not been fully embedded into the country’s security architecture.

While the constitution empowers the Nigeria Security and Civil Defence Corps (NSCDC) to protect critical infrastructure, which includes the pipelines, Nwokolo doubted their knowledge or understanding of pipelines issues.

Speaking on efforts to curb pipeline vandalism, the Group General Manager, Group Public Affairs Division, Ndu Ughamadu, said the contractors hired to monitor the pipelines were functional, but admitted that addressing the situation requires collaboration from oil host communities.

“Some of these communities are collaborating with the alleged vandals in scooping oil,” he said, while calling for collaborative measures to stem the tide.

The spokesperson added that should the contractors fail to perform optimally, a clause in the contract signed with them requires them to pay for loses incurred.

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