Nigeria moves to tackle crude oil theft

The Federal Government through the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) says it has developed key initiatives aimed at reducing to the barest minimum activities of crude oil theft and illegal artisanal refining.

Engr Gbenga Komolafe, Chief Executive Officer, NUPRC, made this known at the Lagos Chamber of Commerce and Industry (LCCI) Public Private – Dialogue on Crude Oil Theft and Artisanal Modular Refineries on Thursday in Lagos.

Komolafe said that an unprecedented level of theft estimated at a daily average of 103,000 barrels which was recorded in 2021 had grown to 120,000 barrels in first quarter of 2022.

He added that daily average production in 2021stood at 1.5 million barrels while the national production advised by the commission was 2.2 million barrels.

“Consequently, only 58 per cent of the technical rate was achieved in 2021 and similar performance has continued in 2022 hence the need for more concerted efforts across all quarters to stem the tide.

“Unfortunately, the amount of oil received at the terminals indicates that over nine million barrels of oil is lost to crude oil theft amounting to a loss of one billion dollars in first quarter of 2022,” he said.

Komolafe said that the effect from this level of theft had resulted in the declaration of force majeure, shortage of wealth, a hostile, unsafe environment and was a disincentive to investors in the Nigerian upstream sector.

He added that many operators had deliberately shut down facilities and pipelines which had further aggravated the low oil production also impacting gas production both for domestic utilisation and exports.

He said that in view of the development and the ongoing government’s efforts to enable the industry deliver production target of three million barrels daily in three years, the commission has developed some key initiatives.

Komofale said that the initiatives were aimed at mitigating oil theft and creating enabling regulatory environment for local refining in Nigeria.

He said they include: a roadmap for tackling the insecurity challenges in the industry, identifying and implementing areas of collaboration between government and operators in ensuring that operators realise their full production potentials.

Others, he said were massive collaboration with the top civil echelon of the Nigerian security forces for a robust security for both operators and host communities.

“The commission is also promoting the implementation of modern security technology for real time loss detection that would enable swift and more proactive responses.

“We also advocate a refinery regulation in terms of establishment of more modular refineries to curb activities of artesians from refining crude which is outside the ambit of the law and absolutely below acceptable minimum standards of technology in the 21st century,” he said.

Dr Michael Olawale-Cole, President, LCCI, expressed concerns over Nigeria’s battle in recent years with dwindling revenue, security challenges, weak infrastructure, rising inflation, high cost of production, and a burdening and unsustainable fuel subsidy.

Olawale-Cole said that crude oil theft had taken a worrisome dimension spiking production costs to $32 a barrel with losses from pipeline vandalisation and theft overwhelming the International Oil Companies (IOCs).

He added that the development had led to several indigenous oil firms contending with rising operational expenses driven mostly by personnel, maintenance, and security costs.

Olawale-Cole said that there were also concerns about the culpability of the nation’s security agencies, noting that barges of oil could not be stolen and moved on the coastal waters without the collaboration of some powerful stakeholders.

“The menace of oil theft has become a national disaster and a critical threat to our revenue base as Nigeria is losing crude oil at the level of about 91 per cent of output.

“Nigeria lost $3.2 billion to crude oil theft between January 2021 and February 2022, as revealed by the NUPRC, the LCCI Oil Producers Trade Section, and the Independent Petroleum Producers Group (IPPG).

“This menace has prevented Nigeria from meeting its crude oil output capacity,” he said.

The LCCI President reiterated the chamber’s position in favour of the removal of fuel subsidies and full deregulation of the petroleum downstream sector to attract required investments into the sector.

He said that the twin factor of fuel subsidy payments and crude oil theft have combined to deny Nigeria the gains of the high crude oil price on the international market.

“No investor wants to invest in an industry where they cannot even recover their cost of production.

“While we expect some respite from the commencement of commercial private sector refining and modular refineries, we call on the regulators to ensure a conducive business environment that supports these investments coming on stream soon,” he said.