The unveiling of new technology tools recently to track crude production and shipment represents a practical step to end leakages and the industrial scale theft of Nigeria’s crude oil and gas. Though welcome for its immense potential benefits, the surprise is that it has taken so long for the government to take such a decisive action to protect national resources and smash a multi-billion dollar organised crime business that has bled the treasury and subverted national development. Now that we can track crude and gas from the wells to their end-user destinations, corruption and ineptitude should not be allowed to neuter the initiative.
Ibe Kachikwu, the Minister of State for Petroleum Resources, revealed this when announcing the introduction of the automated tracking system. The computerised crude oil and liquefied natural gas tracking, automatic downstream and associated automation initiatives would enable the under-performing Department of Petroleum Resources to accurately track crude from the production wells to vessels on the onshore and offshore to their final destinations. With the introduction of these technologies, he said the industry regulator could track crude and LNG up to where “it is going.”
The Nigerian government has a wretched reputation for operating what The Economist of London describes as one of the world’s most opaque oil sectors with a global notoriety for corruption and leakages. For long, local and international agencies have reported huge leakages in the country’s crude and gas production and supply. From under-reporting of their production by international oil companies to outright theft and undocumented sales, the country has for so long been denied the full benefits of its most valuable export resource. A report in 2013 by the British NGO, Chatham House, said Nigeria’s oil was being stolen on an “industrial scale,” perpetrated by organised criminal groups featuring oil traders, security personnel, oil industry insiders, armed militant groups in the Niger Delta region, politicians, shippers and local community leaders. Estimates of the quantity of crude stolen range from 100,000 barrels per day to 400,000 bpd. These figures spike when militant activities lock out oil workers and security operatives from production sites and pipelines.
The Buhari government cites a figure of 250,000 bpd stolen while pioneer chief of the Economic and Financial Crimes Commission Nuhu Ribadu’s figure of $9 billion lost each year to oil theft resonates with the tally of $12.7 billion worth of crude stolen in the three years to 2014 made by civil rights lawyer, Femi Falana, relying on audits by domestic and international agencies. Between 2011 and 2014, undeclared or stolen crude by some oil firms was valued at $17 billion which the government said it might use legal action to recover. OilPrice.com puts monthly loss at $1.7 billion, while Royal Dutch Shell rates Nigeria’s oil theft the world’s highest, pushing Mexico to a very distant second with 5,000 bpd to 10,000 bpd; a loss of $63 million was sufficient to attract Russia’s threatened closure of a major pipeline to Ukraine, while a loss of 2,000-3,000 bpd in Indonesia prompted a crackdown by Indonesian authorities.
Corruption, incompetence and a refusal by successive governments to separate the state from the business of production, distribution and retail and restrict its role to facilitation and regulation, account for the horrendous losses the country suffers from leakages and theft. The state-owned Nigerian National Petroleum Corporation is the epicentre of the resulting “deep state,” sustaining a rent-taking political, bureaucratic and business elite, stifling innovation and private enterprise and depriving the treasury of its due while criminalising the entire sector.
Reforms must go deeper than Kachikwu and government are willing to go. His praise of DPR sits oddly with every other assessment, audit reports and government’s own panel findings. The DPR has been very remiss in doing its job and should be completely overhauled, reformed, made truly independent, well funded and equipped with cutting-edge technology tools. Apart from NEITI’s insistence that the NNPC and its upstream subsidiary, the NPDC, have withheld a cumulative $21.77 billion from the Federation Account up till 2015, Berne Declaration, a Switzerland-based non-profit, in 2013, reported $6.8 billion losses from false subsidy claims in the three years to 2011 as well as other losses arising from sales of Nigerian crude at far below market price and under-reporting of crude production levels by the IOCs with the connivance of regulators.
Removing what Chatham House investigators call the “blurry lines” between legal and illegal supplies of our crude is a starting point. The NNPC’s system of selling oil is noted as “shadowy” and one of the word’s least transparent. The IMF lamented that Nigeria is the only oil major that sells its crude entirely through middlemen, a deliberate ploy by officials to sustain graft and private enrichment at public expense. Government should probe the use of the 445,000 bpd it gives the NNPC to refine or swap for refined products in the short term and negate the need for it by selling off the state-owned refineries.
Crime flourishes where punishment is lax. In Nigeria, big-time oil thieves are hardly ever nabbed and prosecuted unlike in other jurisdictions where economic sabotage attracts zero-tolerance. Singapore, in January 2015, arraigned 20 suspects for stealing $5 million worth of crude. Justice will have to take its course.
Forensic audits, criminal investigations and scrutiny of the security agencies whose operatives in standing units and task forces are notorious for colluding with the oil theft syndicates are crucial.
For now, the tracking system is sound; but the only way to safeguard oil and gas resources is the strong political will to ensure efficiency, enforce the law and stamp out corruption.
