Tackling vandalism in Nigeria's oil industry

Oct 14, 2003 02:00 AM

by Salisu Na'inna Dambatta

Sometime ago President Olusegun Obasanjo and Vice President Atiku Abubakar started a series of briefings and consultations with different segments of the Nigerian society and members of the diplomatic community on the sad and damaging activities of illegal oil bunkerers, vandals and thieves of both crude oil and refined petroleum products from the country's pipelines.
The consultations and briefings with state governors, members of the national council of state, the 30 registered political parties, traditional rulers, top editors of the Nigerian media and other groups, including market women, are part of the democratic process of taking along as many stakeholders as possible in the society in the mundane process of policy formulation and decision making that could have great and sweeping consequences on the polity.

The Nigerian oil industry, which Dr Rilwanu Lukman, Adviser to the President on Petroleum and Energy says accounts for 40 % of Gross Domestic Product(GDP), provides 80 % of government revenue and 95 % of foreign exchange earnings, is so sensitive and central to the Nigerian economy that anything good or bad that affects it has a direct bearing on the well being of Nigerians. The promotion of the welfare of Nigerians is the principal assignment of the government of the day.
And it is clear that the vandalisation of oil pipelines and illegal oil bunkering by syndicates constitute a major economic and social hazard to this country. So the government should safeguard the national interest by taking appropriate measures to end the frequent sabotaging of the pipelines and illegal bunkering.

A recent government fact sheet indicates that between 1995 and 1998, 131 cases of vandalisation of pipelines and other oil industry installations were recorded throughout the country. But in 1999 alone, 497 cases or more than threefold of the cases in the four years to 1998 were recorded. In the year 2000, the Federation of Nigeria, sadly, recorded an all-time high of909 cases of pipelines and other oil installation vandalisation.
In the year 2001 and the year 2002, the records show that 461 cases and 507 cases of vandalisation were recorded respectively. The total cases for the four years from 1999 to year 2002 is 2,374.

This picture is alarming. A sad aspect in this is the fact that the cases escalated despite the creation of the effective Niger Delta Development Commission (NNDC), the implementation of the 13 % derivation principle and other social responsibility measures by oil companies which the Shell Petroleum Development Company says cost them $ 100 mm or N 12.8 bn yearly, and a special high-powered security committee on oil industry installations and youth restiveness inaugurated by the Secretary to the government of the Federation, Chief Ufot Joseph Ekaette in November 2001.
It is widely believed that it was due to a combination of factors, such as the visible impact of the NNDC, the 13 % allocation for derivation and many social responsibility projects implemented by the oil companies, that cases of vandalisation dropped from their peak of 909 in the year 2000 to 461 cases in 2001, but they shockingly resumed their unhealthy rise in 2002 to 507 cases. In 2003, about 300 cases have been recorded in the first six months of the year. The upward trend has to be stopped. This is where the security services and the negotiation and persuasive skills of government officials come in.

The government needs to intensify its dialogue with the restive youths and other residents of the oil-producing areas with the view to minimizing the crisis there. As it is now public knowledge that some security agents allegedly protect the vandals and illegal oil bunkering syndicates or they themselves participate directly in the illegal activities, they need re-orientation and modern equipment.
The illegal activities lead to painful results such as large-scale loss of lives to pipeline inferno. At least 250 people were burnt to ashes in a recent incidence in Abia State. The environment suffers unwarranted degradation from pipeline fires or pollution from crude oil spillage whenever the vandals sabotage a crude pipeline. Stolen or siphoned products, according to the government brief, are loaded "into trucks for disposal to major oil servicing companies or barges for transloading into high capacity vessels."

Another negative result is the loss of a huge chunk of the revenue in hard currency accruable to the Federation of Nigeria. This has a severe impact on the National Income Account, thus aggravating poverty. President of the Nigeria Labour Congress (NLC), Mr Adams Oshimhole said recently that some 59 labour-intensive textile mills are on the verge of closing down due to the scarcity of Low Pour Oil, or black oil, used in running textile equipment, because illegal oil bunkerers have cornered and diverted it, thus creating its scarcity in the system. The closures could cost the nation some 70,000 jobs in this sub-sector alone.
And despite raising the proven reserves of hydrocarbon deposits in the country by over 6 bn barrels in the last four years as stated by Dr Rilwanu Lukman on 1st August last year, the Central Bank of Nigeria (CBN) said in its latest report that the country failed to meet its OPEC quota of 2.018 mm bpd, most likely attributable to a basket of issues and problems in the oil producing areas, including crude theft.

The Federal Government said that some 386,000 barrels of crude oil are lost daily to the activities of the vandals. This loss amounts to a total of 138,960,000 barrels of crude oil in any 366 days, worth $ 3.5 bn in a year calculated at a low $ 26 per barrel. The sum of $ 3.5 bn is slightly more than a quarter of the country's annual budget or more than the Naira equivalent of the amount some 17 states in the Federation receive collectively in a year from the Federation Account.
The amount could also pay for the construction of more than 90 structures similar to the new Central Bank of Nigeria (CBN) headquarters in the CentralBusiness District of Abuja. That $ 3.5 bn could also buy for the country's national carrier at least 40 brand new, top-end of the series, Boeing 747 aircraft with enough spare parts for ten years. Changed to N 350 bn at the rate of $ 1 to N 100, it can finance the sinking of 116,666,666 boreholes throughout the country at N 3 mm each to provide clean water to thirsty Nigerians.

That N 350 bn is more than the total assets of the oldest and largest bank in Nigeria, which its Chairman recently put at N 320.578 bn.
The amount is nearly the equivalent of the annual budget of a particular medium-size country in Southern Africa for seven years, at $ 600 mm per annum. The entire GDP of Sao Tome is $ 60 mm per annum, meaning that exactly $ 500 mm of the $ 3.5 bn is the equivalent of the entire economic output of that country for 8 years and three months, at a 0 % growth rate. The whole $ 3.5 bn represents the economic output of that country at its current level for 60 years. The amount could transform the almost 100 universities in Nigeria into world-class institutions of academic learning and useful research if well applied. It can also give the country a minimum of 10 modern 500,000 bpd capacity refineries that could effortlessly refine crude oil and supply products to the entire continent of Africa.

The loss resulting from crude theft, deferred production or opportunity cost is only half of the picture. This is because the loss resulting from the theft of refined products, such as petrol, diesel, kerosene, aviation fuel, black oil and gas is not part of the $ 3.5 bn loss estimated by the government. All attempts to get the cost over the years in terms of Naira and Kobo regarding the theft of refined products failed. But a government document said there is a "substantial revenue loss (over N 6.4 bn) in year 2000." Even then, the N 6.4 bn is more than the N 6 bn loans obtained by the Borno State Government from three commercial Banks between year 2000 and year 2003.
The Federal Government deserves the support from all sections of the Nigerian society in its determined attempt to face and stamp out crude and refined products theft, vandalisation of pipelines and installations, and illegal oil bunkering. This is because the country cannot afford to sustain the huge loss involved, including the unwanted potential to totally cripple the oil industry.

Anthony Ejele, a senior Federal civil servant who is worried about the problem and fully supports the government in ending or minimizing the crisis, calls for intensive air and ground patrol along oil pipelines, rapid response to reports on leaking pipes, regular checking of the safety status of the pipelines, the setting up of special community-based pipeline protection vigilante groups and a vigorous public education campaign on the dangers of vandalisation, crude and refined products theft and illegal oil bunkering on our costal waters.
And all our neighbours, especially those known to be patronizing the vandals and illegal bunkerers should be diplomatically approached and persuaded to end such patronage. This is simply because a prosperous Nigeria is in their interest as they have socio-economic stakes in our peace and a smooth oil industry in Nigeria. Other concerned Nigerians feel that the Obasanjo administration may consider consultations within OPEC, with a view to learning new ideas in tackling the menace of oil industry vandals and illegal oil bunkering syndicates.

Salisu Na'inna Dambatta is Assistant Director Information in the Presidency.

Source: Vanguard
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