A siege by irate villagers on a major crude oil pipeline in Bodo community, Rivers State, has opened a new dimension in the debate over the worrying level of oil theft in the Niger Delta, where as much as 300,000 barrels of oil is stolen daily, sources have confirmed to BusinessDay.
For two weeks, teams of salvage engineers from Shell Petroleum Development Company, the nation’s largest oil producer, have been prevented by the villagers from accessing a location on the Trans Niger Pipeline (TNP), an oil pipeline capable of moving about 300,000 barrels of crude.
Sources say the development brings to the fore the numerous unresolved incidents of crude oil theft, which has become a major challenge in Nigeria’s upstream petroleum sector and has been described by some stakeholders as organised crime.
“Oil companies have lost huge volumes. We are working with the government and security officials to take back control of the Trans Niger Pipeline,” a senior oil executive told BusinessDay.
He said oil companies had been forced to suspend integrity tests and even planned joint inspection visits to the location on the 24”/28” right of way at Bodo zone 1 since August 24.
If the pipeline is shut for a month, Nigeria will lose about $1 billion at an oil price of $96 a barrel, according to BusinessDay calculations.
Previous attempts by repair teams to enter the community resulted in destruction of vehicles and even physical assault of contractor personnel, according to sources.
BusinessDay learnt that government and security officials on the ground were engaged in negotiations with the villagers to permit entry by contractor staff to identify the leak and seal it.
According to a person familiar with the information, “another leak was made on September 2. This means that both lines are likely impacted”.
The TNP was illegally tapped in about 150 places, the Petroleum and Natural Gas Senior Staff Association of Nigeria said in March when local government checked some of the areas where the theft occurred.
Apart from TNP, BusinessDay’s findings also showed Nigeria is losing 95 per cent of oil output to criminals at oil hub Bonny, the town after which its premium oil grade Bonny Light is named and a key export point for the country.
The country can only secure 3,000 barrels out of 239,000 barrels injected into the pipeline from Bonny Terminal, the Nigerian National Petroleum Company Limited confirmed in a statement seen by BusinessDay.
This rate of theft has forced the NNPC and its Joint Venture (JV) partners to shut down two production fields.
“No one produces oil so that the next person can take it,” Mele Kyari, NNPC’s group chief executive officer, said. “The wise thing to do is to stop production.”
Between January and July, Africa’s second biggest oil producer lost an average of 437,000 barrels of oil a day to criminal entities and individuals who illicitly tap pipelines onshore and offshore in the Niger Delta region, data sourced from NNPC showed.
At current prices, the stolen oil is worth more than $10 billion, which is equivalent to N4.3 trillion (at N430 to a dollar).
Nigeria lost its status as Africa’s biggest oil producer to Angola in May this as its production plunged to record lows amid rising crude theft.
“The pipeline taps are so sophisticated that they ran for 3-4 kilometres and would have involved cranes, industrial equipment and at least 40 workers,” Kyari said. “I can tell you that in one line, just less than 200 kilometres, we had 295 illegal connections.”
In its latest briefing notes, Osagie Okunbor, the country chair of Shell Companies in Nigeria, said rising theft posed an existential risk to the firm’s business in Nigeria.
“Shell Companies in Nigeria, like other operators, have suffered from a growing number of sabotage attacks on our oil wells and pipelines, as well as the rising levels of crude oil theft. This forced us to declare a force majeure on our Bonny export programme, effective March 3, 2022,” Okunbor said.
The company said that in the last quarter of 2021, “crude oil theft from pipelines across the region increased ostensibly as a result of rising oil prices, which made the activity more profitable”.
Experts say this development reflects a larger issue for Nigeria, which is facing shrinking investment and hasn’t been able to meet the quota given to it by the Organization of the Petroleum Exporting Countries in order to benefit from a surge in prices.
The gross oil and gas federation revenue for the full year of 2022 was projected at N9.37 trillion. Still, as of April 30, 2022, only N1.23 trillion was realised out of the projection of N3.12 trillion, representing 39 percent performance.
Financial analysts say the billions of dollar lost to crude oil theft would have saved the country, which is facing many economic headwinds.
“Less than 10 percent of the money we lost to crude oil theft would have been able to address the demands of university lecturers who have been on strike since February,” said Kelvin Atafiri who runs Cavazanni Human Capital Limited, an investment firm exposed to the oil and gas sector.