‘Nigeria loses N2.5bn daily to oil theft’

Written by Daily Trust Wednesday, 22 February 2012

Nigeria is losing an estimated 150,000 barrels of crude oil every day to theft in the Niger Delta region, petroleum company Shell has said.

This volume of stolen crude amounts to about $16 million or N2.5 billion, calculated at oil price of $105 per barrel and a naira exchange rate of N160 to a dollar.

Ian Craig, Executive Vice President, Sub- Saharan Africa Shell Exploration and Production Africa Limited, said in a paper at the on-going Nigeria Oil and Gas Conference in Abuja that the greatest challenge in the sector now is the massive, organised oil theft business and the criminality and corruption which it fosters.

“The volume of oil which is stolen is difficult to estimate but is probably in the region of 150,000 bbls/d,” he said.

“We still face major challenges ... (there is) chronic underfunding of the onshore joint ventures where NNPC (the national oil company) is the majority shareholder,” Craig told the conference.

“The greatest challenge, however, is the massive organised oil theft business and the criminality and corruption which it fosters. This drives away talent ... increases costs, reduces revenues both for investors and the government and results in major environmental impacts,” he added.

Thieves in the Niger Delta use explosives or even just hacksaws to cut open pipelines and siphon out oil, a practice known as bunkering that hurts production and is thought to be part of a large international criminal enterprise.

Since an amnesty for militants in 2009, attacks on oil facilities have become much less frequent and less destructive, but bunkering operations remain a costly headache.

Craig said in December last year, a spill was reported on the NCTL caused by two failed bunkering connections. Repairs took a month, with total production deferments of over 4 million barrels, and thieves used the one-month pipeline depressurization as a window to install even more bunkering points.

He said since the restart of the production in January, there have been multiple trips caused by pressure drops resulting from illegal off take.

“We have found over 50 bunkering points on the line and associated industrial scale illegal refining with major environmental impacts. These are of course now being removed,” he said.

He said Nigeria could produce 4 million barrels of oil per day (bpd) but that big changes would be needed for this to happen.

Nigeria currently produces around 2.5 million bpd of combined crude oil and condensate, and this will soon increase by 180,000 bpd, Petroleum Minister Diezani Allison-Madueke said in a speech.

Craig said oil now is very difficult to get in Nigeria and many other  parts of the world, adding that even with all of today’s technology, most exploration wells fail to discover commercially viable deposits.

“When you are lucky enough to have a commercial discovery, the development costs and timescales are daunting; perhaps $10 billion for a large deepwater development or $20 billion for a large integrated oil and gas project. The execution of the project may take five years or so and many years beyond that before the initial outlay can be recouped,” he said.

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