..Nigeria loses N995.2bn yearly to oil theft
A new report on the age-long crude oil theft in Nigeria has revealed how International Oil Companies (IOCs) in the Niger Delta region steal and siphon large volumes of crude oil from the country undetected by authorities.
The report revealed the revenue losses over the last few years, and estimated that the country lost N995.2 billion annually to oil theft.
According to the report, various strategies used include small-scale pipeline tapping, bunkering and over lifting. While all three types of theft are not mutually exclusive, they each have different sources, actors, markets, and revenue streams.
Although the report carried out by Nigeria Natural Resources Charter (NNRC) did not quantify how much oil IOCs often steal from the country, it, however, explained that when they do, they always resort to a high-wired network of onshore and offshore operators, sellers, financiers, as well as logistics and security firms to pull it through.
The report explored the political economy of oil theft in Nigeria, its causes, dimensions and efforts to curb the practice, which have largely been unsuccessful.
It reviewed previous discussions on oil theft and some of the key recommendations that have been made on addressing the issue, and contextualised the problem, and types of oil theft that occurs in Nigeria.
The report said, “There are several categories of oil theft in existence; small-scale pipeline tapping, bunkering and over lifting. While all three types of theft are not mutually exclusive, they each have different sources, actors, markets, and revenue streams.
“They have seen increased cooperation on ground as profits soared with little deterrence from enforcement agencies. Several investigations have highlighted the complicity between state actors, oil companies and militant elements in all categories of theft.”
The report stated that over lifting is another form of oil theft in Nigeria.
“It refers to the underestimating of the total number of barrels received at any point of the extraction process (but typically after it has been refined) in order to sell the remaining on the black market.
“Underestimation can happen because when oil is drilled and transported via pipelines it also contains sand and water. The sand and water inflate the volume being transported so the refined volume is never equal to the volume received at the refinery,” it stated.
Giving further insight, it said: “Over lifting occurs at tank farms, refineries and distribution centres. Most of these are owned and operated by national and international oil companies.
“These sharp practices have been reportedly going on for a long time, a reason why many assume oil companies are complicit in oil theft.
“The complexity and secrecy behind over lifting makes it hard to track and measure, as the figures for the amount of crude drilled in reserves vary widely.”
The report designed to help governments and societies effectively harness the opportunities created by natural resources, stated that it provided an updated assessment of oil theft in the country as well as the consequential revenue losses over the last few years, and estimated that the country lost N995.2 billion annually to oil theft.
“Oil theft involves a number of participants working in a complex web of illicit transactions. The value chain is made up of on the ground and overseas operations, sales, financiers, logistics, and security,” it added.
According to it, unconfirmed reports have equally stated that every fifth ship of loaded crude oil from Nigeria was not recorded but given falsified documents.
IOCs, it said, also allegedly take advantage of the 10 per cent margin of error allowed on every tanker to gain extra revenue by overestimating how much is lost.
“Underestimation can take place at each stage of the value chain from drilling, transportation, loading, and shipping; potentially creating a wide gap between records and reality.
“Companies also reported to use over lifting to avoid Petroleum Profits Tax by declaring less than actually produced. The NNPC often reports figures they are given by companies and does not independently verify the numbers to ensure compliance,” the NNRC report added.