Reports released by the Nigerian National Petroleum Corporation (NNPC) reveal a significant rise in incidents of crude theft, especially in the Niger Delta region. The increase in oil theft after the removal of fuel subsidies had a devastating impact on the economy Nigeria.
The theft of approximately 619.7 million barrels of crude oil between 2009 and 2020, worth 16.25 trillion Nigerians (about 19.24 billion dollars), paints a bleak picture of the phenomenon of oil theft and expectations regarding its growth.
During the period from September 23 to 29, the Nigerian National Oil Company recorded – according to a report on the Petroleum Economist website – about 170 documented incidents of crude oil theft: 13 cases in deep waters, 45 cases in the western region of the country, and 62 cases in the central region. And 50 large cases in the western region of the Niger Delta, which puts the country in grim repercussions regarding its continuation.
Multiple effects
The repercussions of oil theft extend beyond the direct financial loss, to include the creation of a hostile economic environment, which hinders the federal government’s ability to meet its financial obligations, especially with regard to debt financing, the implementation of major capital projects, and the sustainability of fuel subsidies.
All of this led to the cessation of operations, a decline in production rates, and a significant decline in investments in the oil and gas sector.
In 2022, the CEO of the Nigerian Petroleum Regulatory Commission, Gbenga Kamolave, indicated – in a technical briefing reported by the Financial Times – that the theft of oil led to the declaration of a state of force majeure at the Bonny Oil and Gas Station and the closure of various wells from the fields that connect to the Nembe Creek Trunk Line. Which passes through Niger.
Ayodele Oni, a partner at Bloomfield Law and legal advisor to the Nigerian National Petroleum Corporation, points out that the theft of crude oil continues to cause economic damage in Nigeria, making it difficult for the federal government to meet its financial obligations, especially in the areas of debt financing, fuel subsidies, and the implementation of major capital projects. .
Ayodele says that the scale of losses recorded as a result of the theft of crude oil has created a hostile environment and discouraged investors in the upstream field. He adds that this leads to the cessation of operations, lower production rates, as well as lower investment.
Similar challenges in the Gulf of Guinea
The issue of oil theft is not limited to Nigeria, but extends to many regional countries, as other countries in the Gulf of Guinea, such as Angola, Guinea, Liberia, Ivory Coast, and Togo, face similar challenges.
The Gulf of Guinea is witnessing a noticeable increase in piracy, as the region recorded about 76 actual attacks or attempted attacks during the past year, according to the International Maritime Bureau.
These attacks involve various types of ships, such as oil tankers, drilling vessels and technical vessels, and often result in the hijacking and theft of oil shipments or the kidnapping of the crew.
These actions caused a reduction in the number of ships entering the country’s ports due to fears of attack, while the costs of production and shipping operations increased, according to a report published by the Nigerian website “The Day Live”.
The reasons for this phenomenon are linked to the ineffectiveness of the legal infrastructure, the lack of security measures and maritime oversight, and the failure to implement maritime law, which leads to a lack of protection and safety in marine waters, according to observers.
While the extent of theft may vary across these regions, its effects remain negative on the economies and security of these countries.
The reality of the oil sector in Nigeria
Nigeria’s oil production capacity reached about 1.5 million barrels per day in October 2022, according to a Reuters survey, making the country a prominent contributor to global oil supplies.
Nigeria occupies a prominent position as the largest oil producer in Africa, after surpassing Libya and Angola, according to official figures issued by OPEC and reported by The Cable, an energy newspaper in Africa.
Nigeria has consistently maintained a permanent place among the top 15 oil producing countries globally, while the country has large proven oil reserves estimated at approximately 37 billion barrels. These reserves are among the largest in Africa and constitute a crucial component of the country’s oil industry.
Despite this prestigious position among global producers, Nigeria’s oil industry – which is a major source of foreign revenues and more than half of government revenues – appears to be in a bad situation.
Figures issued by the National Bureau of Statistics in Nigeria show that $45.6 billion in revenues were recorded last year, an increase of 46% over 2021 levels, but these numbers hide the fact that oil production in Nigeria has declined continuously over the past few years.
Last April, for example, the country produced less than one million barrels of oil per day, which is much less than its OPEC quota of 1.8 million barrels per day.
Nigeria’s inability to achieve its OPEC quota, for more than 36 months, has led to a reduction in this quota from more than 1.8 million barrels per day to 1.742 million barrels per day for this year, then to 1.38 million barrels per day in 2024, according to the “The Nigerian Day Live.
Despite the rise in oil prices in 2022 following the Russian-Ukrainian war, the energy sector in Nigeria did not benefit much from this rise.
Former Finance Minister Zainab Ahmed stated in September 2022 that the overall impact of high prices was “zero or negative,” which means that the country did not benefit from the opportunity of higher prices against the backdrop of major theft and vandalism.
In terms of consumption, official figures indicate that Nigerians currently consume about 68 million liters of gasoline per day, compared to about 49 million in 2015.
On the economic level, Nigeria is facing critical crises. Its debt has reached $172 billion, while its inflation rate has risen significantly, leading to an increase in the cost of living.
This pushed many people into the abyss of poverty, as 133 million Nigerians fell into poverty, representing 63% of the total population.
Accordingly, unemployment rates rose significantly and reached 43%, while at the beginning of Buhari’s rule in 2015, it was only about 10%, in addition to the activity of a number of gangs and Niger Delta rebels in plundering and stealing oil, as a result of which the country lost two billion dollars.
Withdrawals
The Nigerian National Petroleum Corporation is the national vision that manages Nigeria’s oil and gas resources.
It works in joint partnerships with many international oil companies, perhaps the most prominent of which are Shell, which at its peak accounted for more than 40% of the total crude oil production in Nigeria, and Chevron, which participates in oil and gas exploration, production and marketing in Nigeria.
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ExxonMobil is another important player in Nigeria’s oil industry, along with Total, Eni, and China’s Addax, according to separate reports by Bloomberg.
Experts say that the combined effects of all these negative factors, in addition to the problem of piracy and oil theft, were behind the recent acceleration in the withdrawal of international oil companies from the onshore oil sector in Nigeria.
The Chinese company Addax handed over its four oil fields to the Nigerian National Petroleum Company in November 2022, at a time when mystery still surrounds the process of ExxonMobil’s withdrawal from 4 oil fields.
A glimmer of hope
But the success of the powerful ruling party candidate Said TinubuIn coming to power to become President of Nigeria after being a godfather whose mission was to make presidents and shape many political equations in the country, this is a new glimmer of hope for investors for the sector to return to its vitality.
During the election campaign, Tinubu referred to his principles that his rule will adopt, which will be based on uniting Nigerians and achieving security in the country within 6 months, in addition to implementing true federalism, strengthening democracy, developing infrastructure, and expanding local companies, which is what has begun to be translated into reality. In the oil sector, the Federal Government of Nigeria announced late last September that it had obtained investment pledges worth $13.5 billion from global oil and gas exploration companies in addition to independent producers, in order to enhance the country’s production of crude oil during the next 12 months.
