Nigeria Loses $3.2bn Crude Oil To Theft In One Year

Lagos Chamber of Commerce and Industry (LCCI) has said that Nigeria lost $3.2 billion to crude oil theft between January 2021 and February 2022.

The chamber’s Oil Producers Trade Section, and the Independent Petroleum Producers Group (IPPG) explained on Thursday in Lagos that the menace of oil theft had become a national disaster and a critical threat to its revenue base as Nigeria was losing crude oil at the level of about 91 per cent of output.

During the LCCI’s Public-Private – Dialogue on Crude Oil Theft and Artisanal Modular Refineries, the President of the chamber, Michael Olawale-Cole, 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 noted 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).

Also, Chief Executive Officer, Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Engr Gbenga Komolafe said that the Federal Government through NUPRC has developed key initiatives aimed at reducing to the barest minimum activities of crude oil theft and illegal artisanal refining.

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 the 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.

The CEO noted: “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 are lost to crude oil theft amounting to a loss of one billion dollars in the first quarter of 2022.”

Komolafe said that the effect of 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 and also impacted gas production both for domestic utilisation and exports.

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

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

He stressed 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 potential.

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

He noted: “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 artisans from refining crude which is outside the ambit of the law and absolutely below acceptable minimum standards of technology in the 21st century.”

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.

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

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.

He said: “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.”