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Crude Oil Theft, Illegal Bunkering: Lessons from Ojumole Well Fire? - THISDAY

MAY 18, 2019

PERSPECTIVE  

Chika Amanze-Nwachuku writes that the recent fire incident at Ojumole Well No. 1, in NNPC/Chevron Nigeria Ltd JV, located in Ilaje Local Government Area of Ondo state, has again brought to the fore the huge impact of oil theft and illegal bunkering on the economy of Nigeria and the environment as well as the need for a more proactive action against the menace

Crude oil theft and illegal bunkering have continued unabated despite the steps taken by oil companies and the federal government to curb the menace.

Illegal bunkering encompasses all acts involving oil theft, including diversion and smuggling of oil and unauthorised loading of ships. One common process requires tapping into oil pipelines and well heads and transporting the oil elsewhere to be sold internationally or refined locally. To access the oil, a small group of welders will puncture a pipeline or well head at night, establishing a tapping point from which the group can operate.

Oil spills and explosions are regular occurrences in the Niger Delta, as pipeline vandalism from bunkering leaves pipes especially vulnerable to leaks, spills, and major accidents.

A case in point was the recent fire incident at NNPC/Chevron Nigeria Ltd JV Ojumole Well No. 1  in Ilaje local government area of Ondo state.

The facility was said to be an idle and plugged well with no flowline connected to it.

The sharp rise in the number of oil spills caused by pipeline theft in Nigeria, no doubt, poses the biggest threat to the growth and stability of the Nigerian economy. Aside the colossal environmental damage, the combination of crude oil theft, illegal refining and pipeline vandalism has become a major obstacle to government’s revenue projections in recent time.

Although the exact volume of oil stolen on a daily basis in Nigeria varies, oil industry sources argue that between 300,000 and 400,000 barrels of crude oil are stolen daily. This accounts for roughly 15 percent of the total number of barrels per day produced.

In 2014, Nigeria was listed as the country with the highest incidents of crude oil theft in the world. In fact, the country was ranked worse than Mexico, Iraq, Russia and Indonesia on the top five countries mostly plagued by oil theft.

The number of spills caused by sabotage and theft in the Niger Delta rose in 2018 to 111 from 62 in 2017, according to recent estimates. The volume of oil spilt as a result rose to 1,600 tonnes, or roughly 12,000 barrels, from 1,400 tonnes the previous year.

An annual sustainability report released in April last year by oil firm Shell, showed that crude oil theft from its pipeline networks in Nigeria rose by 50% to 9,000 barrels of oil a day (b/d) in 2017, from about 6,000b/d in 2016. The oil major revealed that since 2012, it had removed more than 950 illegal theft points.

 

Impact on Economy, Environment

The federal government, while lamenting the huge losses to these illicit acts, confirmed recently that the country was losing about 400, 000 barrels of oil to thieves daily.

Vice President Yemi Osinbajo, who dropped the hint at a recent lecture, put the value of crude stolen then at N4.8 billion daily.

Osinbajo had expressed disappointment that  whereas Nigeria was losing 400,000 barrels of oil daily, a country like Ghana was surviving on less than 150, 000 barrels per day.

Although the British think-tank ‘Chatham House’ in its estimates, put the volume of oil stolen per day to over 100,000 barrels, the United Nations Security Council estimates that Nigeria lost $2.8 billion of revenue to oil theft in 2017 alone.

Also, United Kingdom-funded non-governmental organisation (NGO), Nigeria Natural Resource Charter (NNRC) put the estimated financial value of what Nigeria lost through crude oil theft, sabotage and pipeline vandalism in the Niger Delta region, between 2016 and 2017 alone at approximately N3.8 trillion. This was higher than the N189.4 billion being the combined allocations to the health and education sectors in the 2018 federal budget.

It had been reported that roughly a quarter of stolen crude oil is sold locally. Illegal artisanal refineries located in the Niger Delta “cook” the crude into separate petroleum products. The product yields 2 per cent petrol, 2 per cent kerosene, and 41 percent diesel. The remaining 55 per cent of crude goes to waste, most of which is dumped into the nearby water or into a shallow pit, resulting in environmental and health hazards.

The impact of these criminal activities on the safety of people and the environment is huge. This   includes degraded local environments, pollution of the environment at tap points. Over 50% of the crude oil siphoned in the process due to high pressure, besides waste of oil residues, are pumped into the creeks, rivers, farmlands, ponds, lakes, thereby blighting the environment further. The degradation to the environment occasioned by the illegal bunkering and oil theft, has reduced arable land for farming and has devastated fishing communities.

Impact on the Industry

All the international oil companies (IOCs) and indigenous operators in Nigeria have been affected in one way or the other by the activities of oil thieves, who engage in illegal bunkering and “local refining” operations.

An indigenous company recently declared force majeure on Nembe Creek Trunk Line, due to a fire suspected to have been the result of an illegal third-party breach. It was reported that the incident caused Nigeria’s oil production to fall 8 per cent per day. The Nembe Creek Trunk Line is one of the two key pipelines of Nigeria’s Bonny Light crude grade capable of transporting 150,000 bpd to the export terminal. Shortly after, one of the IOCs declared force majeure on Bonny Light exports, while exports of Amenam, operated by another IOC, were also under force majeure.

There have also been several incidents of third-party interference, tampering with mechanical components and the installed barriers on crude oil well heads, with evidence of illegal bunkering from the wells.  For each incident, the oil companies take steps to immediately re-secure the wells. But the criminal activities persist and sometimes result to explosions and, or fire incidents.

This was the case with one of the IOCs – Chevron Nigeria Limited (CNL), operator of the joint venture between Nigerian National Petroleum Corporation (NNPC) and CNL. At about 10:00 p.m. on Thursday, April 18, 2019, a fire was observed at the Ojumole Well No. 1, an idle and plugged well with no flowline connected to it. Ojumole field is in NNPC/CNL JV’s Western Niger Delta area of operations.

A joint investigation visit (JIV) to the site of the incident on Saturday April 20, 2019, by a team made up of regulatory agencies, community stakeholders and CNL, determined that the fire incident was caused by third-party interference. Environmental monitoring by independent, accredited environmental consultants is ongoing in the area, while the company is currently working with contractors to safely put out the fire as quickly as possible.

While engagements with relevant stakeholders including the government, regulatory agencies and community leaders and efforts in putting off the fire are ongoing, Nigerians must not lose focus on the cause of such incidents and the need to educate our people on the implications of the criminal activities of oil theft and illegal bunkering. It seems normal to lambast oil companies any time such incidents occur and label them as negligent, but nobody ever cautions our people and condemn their criminal activities. The perpetrators of oil theft and illegal bunkering are not spirits; they live amongst us and even exhibit pride in what they do.

Some analysts maintain that one solution to the issue of illegal bunkering is the establishment of modular refineries in the Niger Delta. The federal government has expressed commitment to pursuing the goal of establishing such refineries. A total of 38 licenses have been issued to prospective operators, ranging from high-scale refineries of 50,000 to 100,000 barrels per day. Reports show that out of these, about 10 of the modular refineries have advanced and they have all secured permit to construct.

The tapping of Forcados crude oil export terminal in 2013, was an eye opener that those involved in the unlawful act might not be ordinary thieves, but people with special technical training to operate the Surface Controlled Subsurface Safety Valves and the Surface Safety Valves installed on the flowline near the wellhead to secure the oil well and prevent crude theft.

Given that oil still remains the life blood of Nigeria’s economy as it accounts for 70 per cent of Nigeria’s total government revenue and 95 per cent of the country’s export income. For instance, a loss of 300,000 barrels oil a day costs the government roughly $1.7 billion a month, therefore curbing the menace of crude stealing, which is a major threat to the country’s economic growth and stability should indeed be an urgent national priority. Tackling this hydra-headed monster requires the cooperation of host communities and other relevant stakeholders.

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