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June 29, 2012

150,000 Barrels a Day Lost To Nigerian Oil Thieves

By Economy Watch

Criminal networks in Nigeria have been siphoning nearly 150,000 barrels of oil per day (bpd) from state and oil companies, said the Managing Director of Shell Petroleum Development Company Nigeria on Tuesday, as the government prepares to set up a taskforce that will look into mismanagement and fraud in the energy sector.

According to Mr Mutiu Sumonu, Nigeria was losing 5 billion dollars annually to oil theft and the time had come for “every tier of government” to “be involved in the fight against illegal oil bunkering.”

“There must be political will by all stakeholders to be able to fight illegal oil bunkering,” said Sumonu, noting the “unprecedented upsurge of illegal oil bunkering activities in Nigeria's coastal region.”

The most common source of oil theft in Nigeria happens when local residents siphon small amounts of oil from pipelines rupture or spring leaks.

Criminal networks however have been able to take this activity one step further, by intentionally damaging pipelines and creating illegal flow stations that would lead to containers or “bunkers” – hence the term “oil bunkering”.

These criminal networks have also proven to be increasingly difficult to stop, given that they are heavily armed and have evolved from being mere local gangs to actual militias.

Speaking to the Financial Times, Nigerian Finance Minister Ngozi Okonjo-Iweala acknowledged the problem; and stated that the losses incurred by the government may be even greater than Shell’s estimates.

According to Okonjo-Iweala, the trade in stolen oil led to a 17 per cent fall in official oil sales in April, or about 400,000 barrels per day. At average April prices of $121 per barrel, this results in a monthly loss of $1.2 billion.

“We have to get very serious about the bunkering issue,” she said. “If we can stop the amount that is stolen we can beef up the excess crude account faster.” Yet corruption and collusion by senior political and military figures with the criminal networks remain the biggest hindrance to solving “illegal bunkering.”
On Tuesday, Nigerian President Jonathan Goodluck replaced seven top executives at the Nigerian National Petroleum Corporation after discovering a corrupt fuel subsidy scheme that cost the economy $6.8 billion from 2009 to 2011.

According to FT, the stolen oil in Nigeria are sold to international traders who provide oil at discounted prices to refineries in west Africa and in China and India.

Courtesy Economy Watch(EconMatters author archive here

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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