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Militant attacks, oil bunkering push economy to the brinks

By Kelvin Ebiri (South-South Bureau Chief)
14 August 2016   |   2:15 am
Nigeria’s economy is sliding downwards due to tumbling crude oil price, unabated illegal oil bunkering and catastrophic attacks on critical oil and gas installations by militants in the Niger Delta.
Militants

Militants

Nigeria’s economy is sliding downwards due to tumbling crude oil price, unabated illegal oil bunkering and catastrophic attacks on critical oil and gas installations by militants in the Niger Delta.

It is estimated that militants and other economic saboteurs who depend on stolen crude to fund their asymmetric war against the State pilfer some 400,000 barrels of crude oil daily through pipeline vandalism, illegal crude oil diversion and ferocious attacks.

Monetarily, The United States Deputy Ambassador to the United Nations, Michele Sison, while citing a Chatham House report: ‘Nigeria’s Criminal Crude: International Options to Combat the Export of Stolen Oil,’ estimated that about $1.5b is lost monthly due to activities of illegal bunkering cartel and militants.

Although the Niger Delta coastlines have for centuries been traditional smuggling routes, the unabated activities of oil bunkering cartels has been fostered by an ill equipped naval force, marine police and the Nigerian Maritime Administration and Safety Agency (NIMASA) inability to police the vast porous coastal routes, littered with unprotected long stretches of pipelines that crisscross the creeks of the Niger Delta.

Beginning with the first commercially viable discovery at Oloibiri in Bayelsa State in 1956, with a modest production rate of 5,100 barrels per day, the country attained a maximum crude oil production capacity of 2.7 million barrels per day, in 2012. With reserves of 28.2 billion barrels, by 2012, Nigeria had already emerged Africa’s largest producer of crude oil and the sixth largest oil producing country in the world.

But, regrettably, since late 2015, the country’s oil industry has been buffeted by waves of militant attacks, thus, causing Angola to emerge Africa’s largest oil producer. Amid plunging crude oil price, pipeline vandalism by militants from Akwa Ibom to Delta State, have only worsened the country’s economic woes amid the industry’s biggest slowdown in a generation.

The country’s crude oil production has dropped drastically from an average of 2.2 million barrels per day in early 2015 to about 1.4 million barrels per day, in 2016 due to resurgence of militant attacks.

It would be recalled that in February, NDA through its spokesperson, Mudoch Agbinibo, declared a war against all oil and gas companies in the Niger Delta, thus, compounding the country’s economy, which is predominately dependent of crude oil that accounts for close to “90% of exports and roughly 75% of the country’s consolidated budgetary revenues.

In February alone, NDA blew up the Bonny Soku gas export line. It claimed responsibility for the attacks on Agip Brass crude oil pipelines in Bayelsa State; Escravos- Warri crude oil pipeline, Alero Dibi Abiteye crude oil pipeline. A few days afterwards, the group also attacked Shell’s Forcados terminal, and threatening to reduce daily production of oil to zero in the Niger Delta. In addition, it also attacked Agip pipeline manifold in Clough Creek Tebidaba in Bayelsa State. In February oil production stood at 1.744 million barrels per day, while crude oil production recorded a significant decline to 1.677 million bpd in March.

Already, Nigerian Petroleum Development Company (NPDC) is losing N20b monthly to the closure of the Forcados export line. NPDC would have lost a substantial portion of estimated crude oil sales of over N120b by the end of September when the export line is expected to be fixed.

In May, NDA struck Nigerian National Petroleum Corporation (NNPC) crude and gas lines. It attacked crude line that feeds the Warri and Kaduna refineries respectively. It also blew up major pipelines to effectively put the Abiteye, Alero, Dibi, Otunana and Makaraba flow stations that feed the Chevron tank farm out of operation.  The NDA stated that its major goal is to cripple the economy.

Following these waves of attacks, the Minister of State for Petroleum Resources, Ibe Kachikwu, in May told the House of Representatives that the country was losing estimated 800,000 barrels of crude oil daily due to attacks on oil installations in the Niger Delta by militants under the aegis of Niger Delta Avengers NDA. According to him, if the activities of the militants persist, the 2016 budget, which pegged oil production at 2.2 million barrels per day, will be adversely affected.

While in June, the NDA restated its commitment to attack the interest of oil corporation and international refineries operators that bring in vessels to the Niger Delta territory to buy the country’s oil that every successive government have refused to use and reapply the proceeds towards any development in the region since 1958.

“If they refuse to heed to our advice, we will result to sinking of two of their mother vessel as an examples to others. They should not undertake any repair of pipeline, oil and gas facilities that is damaged or attacked by our forces during this period of “Operation Red Economy” until and/or after the dialogue,” said Agbinibo.

And in July, the NDA widened its scope of attacks by blowing up 48-inches Exxonmobil pipeline, forcing the oil company to declare force majeure few days after the attack.

“We are warning Exxonmobil not to carry out any repair work on the blown pipeline; if they refuse and go ahead with any repair work something big and worst will happen. To the traders/international refineries doing business with them, don’t let ExxonMobil deceive you that the repair work will take three to four weeks. With the level of damage, it will take them (ExxonMobil) months to fix it. What happened to Shell Petroleum Development Company (SPDC) crude oil export pipeline in Forcados, is an example to all International Oil Companies, no repair works until the Federal Government heed our demands,” said Agbinibo.

Still in July, the militants blew up Chevron Manifolds. The manifolds are RMP 22, 23 and 24. In addition, they also blew up Nembe 1, 2, 3 and Tebedaba Brass trunk line in Bayelsa/River States.

Due to these sustained strategically targeted attacks, the country recorded the highest decline in crude oil production in July. Crude oil production dropped from the 1.549 million bpd in June to 1.508 mbpd in July. This is far less than the country’s target of four million barrels daily and the expected 2.2 million bpd estimated in the 2016 budget.

As crude oil price plummets and attacks on oil installations continue, leading to severe contraction in government revenues, thus, exposing the vulnerability of the Nigerian economy to the vagaries of the international crude oil price and politics, Shell Petroleum Development Company (SPDC) in a 2016 report, has identified crude oil theft, sabotage and illegal refining as some of the operational challenges in the Niger Delta.

“Security in the Niger Delta remains a major concern with persisting incidents of criminality, threats from militant elements, violent host community agitations and most recently, offshore piracy. Crude oil theft and related damage to oil and gas facilities in particular continue to present significant security concerns. Oil and Gas operations in parts of the region are severely impacted by these criminal activities. Armed robbery and kidnapping for ransom are also on-going threats”

“Theft of crude oil on the pipeline network was 25,000 barrels of oil per day (bbl/d) in 2015, which is less than the 37,000 bbl/d in 2014. The number of sabotage-related spills declined to 93 incidents compared with 139 in 2014. In 2015, the decrease in theft and spills was also in part due to divestments in the Niger Delta. However, theft and sabotage are still the cause of 85% of spills from SPDC JV pipelines,” said Shell.

Former PENGASSAN Industrial Relations Officer, Chika Onuegbu, said the fall in crude oil price and incessant oil theft have begun to negatively impact very heavily on the Nigeria oil and gas industry, and indeed the Nigerian economy. Already, he said there are strong fears that some 120,000 direct and indirect jobs may have been lost in the Nigerian oil and gas sector.

“Indeed this is a very difficult time for the Nigerian oil and gas sector and indeed Nigeria. The sector and the economy has seen unprecedented number of job losses (some 120,000 direct and indirect jobs have been lost in the Nigerian oil and gas sector), as companies and organisations struggle to keep afloat in the midst of pressures from international crude oil price and Nigeria’s inability to make needed reforms, especially passage of the Petroleum Industry Bill (PIB), diversification of the economy and stoppage of crude oil theft. At present, the Nigerian economy is in a very bad shape and is obviously not prepared for any sustained fall in crude oil price as global analysts forecast,” said Onegbu.

An oil industry security analyst, Mr Kelechi Ibem, told The Guardian that oil theft has long been a way of life in Niger Delta due to the pervasive allure of ill-gotten oil wealth in the country. And worst still, oil theft has now become entangled with militancy too.

“Oil bunkering is a primary source of funding for militants in the Niger Delta. You will recall that some of the militants surrendered high calibre weaponry during the 2009 presidential amnesty offer for militants. Has anyone ever bothered to find the source of the weapons? Due to the porousness of our coastlines, international oil cartels smuggle in weapons in exchange for crude oil,” he said

Ibem noted that a state like Rivers had attempted to combat the menace of oil theft by procuring two armoured surveillance helicopters.  He regretted that the frosty political feud between then President Goodluck Jonathan the then Rivers State governor, Chibuike Amaechi, impeded the delivery of the choppers from the United States and their subsequent deployment to tackle crude oil theft.

A member of the default Niger Delta Technical Committee who pleaded anonymity disclosed to The Guardian that security agencies had while making presentation to the committee indicted some oil industry workers, prominent politicians and businessmen as being behind illegal oil bunkering.

He explained that persons involved in illegal oil bunkering are often skilled persons who have worked in the industry. He argued that by the nature of oil exploration, it will be absolutely difficult for an average without technical know-how to take the risk of drilling into high pressure pipelines and well heads to steal crude oil.

Christina Katsouris and Aaron Sayne in their report: ‘Nigeria’s Criminal Crude: International Options to Combat the Export of Stolen Oil’ published by the Chatham House, said Nigerian crude oil is being stolen on an industrial scale.

“Some of what is stolen is exported. Proceeds are laundered through world financial centres and used to buy assets in and outside Nigeria. In Nigeria, politicians, military officers, militants, oil industry personnel, oil traders and communities profit, as do organised criminal groups. The trade also supports other transnational organised crime in the Gulf of Guinea,” they said.

The Director General of NIMASA, Dr. Dakuku Peterside, had assured that the country is determined to partner with local and international counter piracy authorities to eliminate criminality on her waterways.

“We have a close working relationship with the United Nations Office on Drugs and Crimes (UNODC) in order to foster an integrated approach to dealing with the menace. We have also increased surveillance and have deployed world class maritime domain awareness assets in conjunction with the Nigeria Navy and the Nigeria Ports Authority to monitor our maritime environment.”

Peterside explained that in addition, the country has deployed Maritime Patrol Aircrafts (MPA) in collaboration with the Nigerian Air Force as well as other naval assets to patrol and monitor the country’s waterways.

An American oil expert and President, Global Water and Energy Strategy Team (GWEST) Paul Michael Wihbey, is of the view that the Federal Government should adopt coercive approach to end illegal bunkering. According to him, with proper mapping of the area where oil theft is rife and application of technology, the country could shut down the entire illegal oil bunkering within months.

The Chief of Army Staff, Lt.-General Tukur Buratai, has warned that the military will use coercive force against militants in the Niger Delta if the ongoing dialogue with the Federal Government fails.

“Government is still committed to dialogue and whereby this cannot go on – then there could be resort to other means. The non-kinetic (force) means has always been the source first before government can recourse to the kinetic means. So, there is need for the Niger Delta Avengers to see reason and dialogue with government,” said Buratai.

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