How Nigeria lost $28bn oil revenue — 99% of 2019 budget
In the last 10 years, Nigeria may have lost revenues as high as $28.61 billion, from failure to review the Production Sharing Contract (PSC) terms guiding oil production from seven deepwater fields in the country.
This projection was made in a policy brief released by the Nigeria Extractive Industries Transparency Initiative (NEITI) on Sunday.
The document titled “1993 PSCs: The Steep Cost of Inaction”, showed that the federal government was denied oil revenue that would have been earned between 2008 and 2017 if the contracts were reviewed in line with applicable fiscal terms.
PSCs are agreements where oil companies bear the risk and cost of exploring for hydrocarbon resources covered by its licence, and subsequently recovers its operational costs from what is produced.
The Nigerian National Petroleum Corporation (NNPC) enter these agreements with International Oil Companies (IOCs) through their Nigerian subsidiaries and sometimes with indigenous oil companies.
Under the fiscal terms of the agreements between the IOCs and NNPC, the companies are under obligation to pay royalty oil and tax oil to the Department of Petroleum Resources (DPR) after which the other parties to the contract share the profit oil.
Quoting section 16 (1) of the Deep Offshore and Inland Basin Production Sharing Contracts Act Cap. D3. LFN 2004, the NEITI brief showed that the fiscal terms for the PSCs between NNPC and IOCs “ought to have been reviewed” on two occasions.
First, in 2004 when real oil prices exceeded $20 per barrel, and most importantly, 15 years after the 1993 fiscal terms were launched, which should have been January 1, 2008.
AKPO, AGBAMI RECORD BIGGEST LOSSES
Using financial modelling analysis, the study examined oil production data from the seven fields, oil prices, and newer fiscal regimes, to arrive at estimated revenue figures for the period under review.
The seven deep water fields considered are Abo (OML 125), Agbami-Ekoli (OML 127 & OML 128), Akpo & Egina (OML 130), Bonga (OML 118), Erha (OML 133), Okwori & Nda (OML 126), and Usan (OML 138).
The field operators include, but are not limited to, Eni, Total, Shell, Chevron, Famfa Oil, Exxon Mobil, Petrobras, South Atlantic Petroleum and Addax petroleum.
The NEITI brief showed that under the fiscal terms of the 1993 PSCs, total revenue from the seven fields amounted to $73.78 billion.
If the terms of the 2005 PSCs had been used, however, total government revenue from these fields would have amounted to $89.81billion, meaning that $16.01 billion was lost in the review period.
Out of that, the Agbami field located in OML 127, operated by Chevron, Famfa Oil and Petrobras recorded the biggest loss.
Here, the government was denied revenue especially from profit oil and would have earned $22.15 billion instead of $17.72 billion, signifying a loss of $4.44 billion.
Depleting government revenues further, outdated fiscal terms on the Akpo field located on OML 130 and operated by Petrobras, South Atlantic Petroleum and Total, resulted in a loss of $3.22 billion.
Revenue was estimated to reach $9.54 billion instead of the $6.32 realised.
In percentage terms, there would have been a 50.91% increase in revenue from OML 130, if 2005 fiscal terms had guided the PSCs as against the 1993 fiscal terms applied.
In another scenario, NEITI concluded that if the government was able to obtain profit share from all seven fields based on the terms of the 2005 fiscal regime, revenue would have hit $102.39 billion. This represents a loss of $28.61 billion.
In this scenario, revenues from Agbami would have increased to $31.51 billion, representing a huge loss of $13.79 billion within the 10-year review period.
LOST REVENUE COULD FUND MAMBILA POWER PROJECT
Based on the empirical evidence provided in its policy brief, NEITI said the billions of dollars in lost revenue would have been used to fund long-standing capital projects to deal with the nation’s infrastructure deficit.
“The lower threshold loss of $16.03bn to the Federation Account would have funded the Port Harcourt – Maiduguri rail line put at between $14bn to $15bn,” the NEITI document read.
“Other projects that the lost revenue could have been used to fund include the Mambila Power Plant of 3,050 MW at $5.72 billion, while the estimated cost of the Ibadan-Ilorin-Minna-Kano Standard Gauge line is $6.1 billion.
“The combined cost of these projects is $11.82 billion, which is less than the lower threshold of estimated losses.”
Other projects listed by NEITI includes “the Calabar-Lagos Rail line ($11 billion), Fourth Mainland Bridge ($1.4 billion), Badagry Deep Water Port Complex ($1.6 billion), and Lekki Deep Seaport ($1.2 billion).”
REVENUE LOST COULD FUND 2019 BUDGET
The higher estimated loss of $28.61 billion, according to NEITI, can fund 99 percent of the proposed federal government budget for 2019.
The N8.83 trillion naira budget ( ($28.80 billion) was presented by President Muhammadu Buhari to the national assembly in December 2018.
The total projected revenue, according to Buhari, is N6.97 trillion, consisting of oil revenue projected at N3.73 trillion, and non-oil revenue estimated at N1.39 trillion.
But with the loss recorded from the outdated PSCs, government may have to resort borrowing in its struggle to fund the capital projects outlined in the 2019 budget.
In its recommendation, NEITI charged the federal government to use relevant agencies to “immediately” review the “outdated PSC terms” with oil companies.
The NEITI brief noted that the affected companies “have expressed willingness to negotiate these terms” and should therefore be carried along in the review process along with state governments.
Court fixes March 29 for hearing on suit asking Malami to revoke OPL 245
A Federal High Court in Lagos has fixed March 29 for the hearing of a suit seeking the revocation of OPL 245 awarded to oil giants Shell and Eni.
In April 2018, Human and Environmental Development Agenda (HEDA) had filed an ex-parte motion, seeking an order for Abubakar Malami, attorney-general of the federation (AGF) to revoke the licence on grounds that it was awarded illegally.
Giving details of the court’s proceeding in a statement on Wednesday, Lanre Suraju, executive director of HEDA, said the group was represented in court by R.A.O Adegoke and Aishat Odekunle.
Both counsels according to him, asked the court to grant its request to probe into processes involving the license which HEDA said were flawed.
Adegoke said that all parties had been served their processes, which had prompted “preliminary objections” from the defendants.
“The Plaintiff equally filed its reply to all, hence, counsel to the defendant applied for a short date for the hearing of the matter,” the statement read.
“O. Ojo and M. Nwodo stood for the 2nd Defendant, Abiodun Rufai for the 3rd Defendant and E. A. Ejiga, (Miss) for the 4th Defendant.
“The 2nd Defendant objected and rather requested a date for the hearing of the preliminary objections filed by the 2nd -4th Defendants which challenge the jurisdiction of the court and this was seconded by the other defendants.
“Consequently, the court adjourned to the 29th day of March 2019 for the hearing of the preliminary objections of all the defendants after which it will then give its ruling and decide whether there is a need to hear the Plaintiff’s application or not.”
OPL 245 is one of the largest oil blocks in Nigeria.
Oil revenue threatened as Nigeria’s largest buyer signs new deal for US shale
Nigeria’s crude oil revenue is set to take a hit as the country’s largest buyer, India, has struck a deal worth $1.5 billion, to buy oil from the US.
In a statement on Monday, state-owned Indian Oil Corporation Ltd (IOC), announced a year-long contract that will see the delivery of up to 60,000 barrels of oil per day (bpd) or three million tonnes worth of crude cargoes.
“Indian Oil has finalised a term contract for import of up to 3 million tonnes of crude oil of US origin grades as a part of its strategy to diversify term crude sources, Sanjiv Singh, IOC’s chairman said on Monday.
The new deal– the first of its kind– would cut India’s dependence on the Organisation of Petroleum Exporting Countries (OPEC) and its members including Middle Eastern nations and their West African counterparts.
This would enhance India’s bargaining power with the US, Sri Paravaikkarasu, an international energy consultant, told Reuters.
“Lots of geopolitical issues are going around. We expect lots of volume going away from Venezuela, west Africa and Iran, so it makes sense to have guaranteed term supplies from the U.S., where crude production is increasing,” she said.
As at 2017, India was the largest importer of Nigeria’s crude, buying over 131 million barrels of oil in that year, according to a report by the Nigerian National Petroleum Corporation (NNPC).
The second largest importer of Nigeria’s crude in 2017 was the US, with over 94 million barrels of oil sold to the North American country.
But with the changing dynamics in the global oil market, the US has now become the biggest producer of crude oil in the world, making it offer terms that address its location disadvantage with respect to its rivals in OPEC– all in a bid to secure the Indian market.
Oil sector’s contribution to GDP
In Nigeria, crude oil exports account for about 90 percent of foreign exchange earnings and 80 percent of government revenue, thereby making the nation’s economy heavily reliant on the petroleum sector.
The oil sector witnessed negative growth between 2013 and 2017 on the back of volatility in the international market and challenges to output as a result of militant attacks on pipelines and other infrastructures.
Although the sector picked up in 2017 after Nigeria exited its worst recession in 29 years, the latest figures released by the National Bureau of Statistics (NBS), shows that the nation may be heading for dire straits once again.
The NBS report shows that the oil sector recorded a real GDP growth rate of –1.62% (year-on-year) in Q4 2018, indicating a decline of –12.81% points relative to the growth rate recorded in the corresponding quarter of 2017.
On an annual basis, real GDP growth for the oil sector stood at 1.14% as against 4.69% recorded in 2017.
Contribution to aggregate real GDP in 2018 was 8.60%, slightly lower than the 8.67% recorded in 2017.
Conversely, the non-oil sector’s annual contribution to GDP was 91.40% as against 91.33% in year 2017.
The “key performing activities” responsible for the growth were said to include transport, information & communication, electricity, water, and arts & entertainment.
OPEC cuts and Nigeria’s oil revenue: risk or reward?
In 2018, Ibe Kachikwu, minister of state for petroleum resources had said foreign exchange reserves grew by about $20 billion as a result of oil production exemption granted to Nigeria in 2016 by OPEC, as well as the relative peace that has returned to the Niger Delta.
Nigeria’s exemption for the output cut deal has however ended and the nation is expected to cut her production by 53,000 barrels of oil per day (bpd), which is approximately 2.5 % of current productions figures.
This would bring the nation’s oil production to 1.68 million bpd excluding condensates.
Rather than being a cause for concern, the minister said Nigeria can cope with the reduced contribution to OPEC by focusing on local refining to meet local demand for petroleum products.
“If we can develop in-house production and just feed into our refineries, then what we are taking out becomes very minimal. That is what we are going to focus on,” Kachikwu had told TheCable Petrobarometer.
Compliance to OPEC cuts may also pose new challenges as a result of spike in oil production expected from new deepwater projects coming on stream including Total’s Egina and SNEPCo’s Bonga South-West Aparo.
But Kachikwu has said that in the case of oil produced from the Egina field, it might be classified as a condensate — a much lighter, more gasoline-rich oil that’s not bound by the OPEC cuts.
“We are trying to look at Egina more as a condensate production. We are looking at the crude configurations of Egina. Once we can certify that some of that, if not most of that is from condensates, then it (production cap) really won’t have much of an application,” he said.
OPL 245: Ex-AGF ‘collected $10m’ out of alleged $50m Malabu bribe
Adebayo Ojo, former minister of justice and attorney-general of the federation says he collected only $10 million as “legal fees” out of $50 million agreed with Dan Etete, former minister of petroleum resources, for the sale of the deepwater oil block, OPL 245 to Malabu Oil and Gas (Malabu) in 2011.
Located on the southern edge of the Niger Delta, OPL 254 is said to have about nine billion barrels of crude oil, estimated to worth half a trillion dollars.
In a Milan court proceeding on Thursday, Ojo said he provided legal advice to Etete between 2009 and 2011, while seeking possible buyers for the lucrative oil block.
However, investigation documents made available to the court said the $10 million “legal fees” Ojo received is just a tranche of a “$50 million bribe” paid by Italian oil giant, Eni, for the purchase of the oil block from Malabu.
The $50 million represents five percent of $1.1 billion allegedly used to bribe local politicians, intermediaries and others involved in the case.
Royal Dutch Shell and Eni, alongside a number of their senior executives have been involved in lawsuits for their alleged role in the deal, which both companies have denied.
In February 2017, both companies had through their Nigerian subsidiaries, asked a federal high court to reverse an order that revoked the award of OPL 245 to them after purchasing the block from Malabu.
During the Thursday trial, Sergio Spadaro, the lead prosecutor, questioned Ojo about the “legal work” he had done as claimed, but the former minister did not provide details of his assignment, claiming “professional secrecy”.
Ojo, however, specified that during that time, he didn’t know about the lawsuit initiated by Shell nor that both Shell and Eni “could be buyers” of OPL 245.
He confessed that he still had dealings with Vincenzo Armanna, a former manager at Eni and had in 2012 paid the Italian $1.2 million for a business in the “gold sector that aims to expand to the renewable energy sector and oil”.
The money paid to Armanna according to him, was from his $10 million “legal fees” which was transferred from one “Rocky Top Resources to his personal account because his firm did not have a foreign account.”
Referring to the payment made to Armanna, the former minister said: “The money has not been asked back because we still want to work together.”
Abubakar Aliyu, a Nigerian businessman who is also under trial for his alleged complicity in the case, was not present for court proceedings on Thursday as scheduled.
Aliyu said he only just discovered the same day his trial was to hold that he is being investigated in a related case.
The businessman claimed not to know the accusations made against him, adding that he “cannot assess whether or not to answer”.
His case was adjourned to February 13.
Kachikwu: Nigeria will focus on local refining to deal with OPEC cuts
Ibe Kachikwu, minister of state of petroleum resources, says Nigeria will deal with the cap on oil production by the Organisation of Petroleum Exporting Countries (OPEC), by focusing on refining crude oil locally and consuming what is produced.
Kachikwu made this known while speaking with TheCable Petrobarometer during the ongoing Nigeria International Petroleum Summit (NIPS 2019) in Abuja on Monday.
During the last OPEC and non-OPEC ministerial meetings in December, Nigeria voluntarily agreed to curb her quota by some 53,000 barrels per day (b/d), bringing it down to around 1.68 million barrels per day (mbpd) excluding condensates.
There are speculations that this will affect the implementation of the 2019 budget since the daily production will be below the budget benchmark in relation to oil prices.
But according to the minister, even if there new deepwater projects coming on stream, as long as the nation’s refineries are operating at full capacity and most of what is produced is consumed locally, then the nation’s contribution to OPEC can be “minimal”.
“Nigeria’s Crude Oil production is currently between 1.74 million barrels of oil per day (mbpd) and 1.75 mbpd. Condensate production is about 400,000 b/d,” he said.
“It is good enough to say we are cutting. The realism, what I see in the market today is that despite the cuts–the more we cut, the more the Shale keeps pumping back into the market.
“I have not tried to restrict production (by the producers), I have tried to say, first of all, respect the OPEC quota. What can we do to develop in-house consumption.
“Refineries are 400,000 barrels of oil per day (bpd). Dangote is about 650,000 b/d. if we can develop in-house production and just feed into our refineries, then what we are taking out becomes very minimal. That is what we are going to focus on.”
Egina output not affecting Nigeria’s OPEC quota
Citing the example of Total’s Egina field, Kachikwu said the OPEC cuts will not “have much application” if it is discovered that most of its (Egina) production are condensates.
“The more discoveries we’ve had, the more we struggle with the (OPEC) cuts, but luckily we are trying to look at Egina more as a condensate production,” he said.
“We are looking at the crude configurations of Egina. My guys are working with Total to look at the mix, because once we can certify that some of that, if not most of that is from condensates, then it (production cap) really won’t have much of an application.
Also speaking during his goodwill address, Nicolas Terraz, managing director, Total E&P Limted, represented by Ahmadu Kida-Musa, deputy managing director (deepwater), told the minister that the company’s new projects—Ikike and Preowei–would need government’s support.
“We shall also…introduce our new projects, Ikike, which is ready for sanctions and preowei, both of which my MD went to Paris to defend,” he said.
“I do understand honourable minister that… we need your attention on these advancements on the (FDP) field development plan.”
NEITI: Oil and gas sector generated $17.05bn in 2016 — lowest in 10 years
Revenue generated by Nigeria’s oil and gas sector fell to $17.05 billion in 2016, making it the lowest figure recorded in the last 10 years.
This is according to the Nigeria Extractive Industries Transparency Initiative (NEITI) 2016 Oil and Gas Industry Audit Report which was released on Friday.
In a statement signed by Orji Ogbonnaya Orji, NEITI’s director, communications and advocacy, the drop was attributed to low oil prices in the global market and reduced oil production in Nigeria.
The fall in oil production was further linked to vandalism of pipelines and other major assets in the sector, as well as a rise in crude oil theft occasioned by the affairs of the Niger Delta militants.
According to the report, the average price of crude oil per barrel in 2016 was $43.73 as against $52.5 in 2015.
Oil and Gas Earnings ($Billions)
Total oil production in the review period was 659 million barrels as against 776 million barrels produced in 2015.
This means there was a 31 percent decline in the sector’s earnings from $24.79 billion generated in 2015, and a 75 percent drop from $68.44 billion generated in 2011, leading to a 9.5 percent drop in the sector’s contribution to Gross Domestic Product (GDP).
A break down of the 2016 revenue figures also showed that export and domestic sale of crude oil and gas generated $7.97 billion, Petroleum Profit Tax (PPT) generated $4.21 billion, while royalty oil generated $1.57 billion.
The report revealed that in 2016, crude oil produced from Production Sharing Contracts (PSCs) overtook output from the Joint Ventures (JVs)– the first recorded in the sector’s history.
In the review period, PSCs accounted for 324 million barrels, while the JVs accounted for 289.1 million barrels, (as against the 320 million barrels for PSCs and 375.5 million barrels for JVs in 2015)
“This change in production structure pushes to the fore the need to renegotiate the terms of the PSCs as stipulated in the Deep Offshore and Inland Basin Production Sharing Contracts Act of 1993 so as to increase government’s take,” the report read.
FG gets five-day grace as DAPPMAN suspends shutdown
The Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) has suspended its earlier directive to commence shutdown of depots across the country from loading petroleum products.
The suspension directive was made known in a statement issued in the early hours of Monday by Olufemi Adewole, DAPPMAN’s executive secretary.
The association had earlier directed marketers to shut down all loading operations by midnight on Sunday.
“However, following the intervention of well-meaning Nigerians including the National Assembly as represented by the Senate Committee of Petroleum Downstream and constructive engagement of the Federal Government team by the labour unions most affected by the disengagement of our personnel, namely, PENGASSAN, NUPENG NARTO, and the PTD, DAPPMAN has resolved to recall its disengaged personnel for 5-days to give the FG’s team the opportunity to conclude its process of paying marketers the full outstanding of N800 billion with the first trench being the amount already approved by the Federal Executive Council (FEC),” the statement read.
“The association has acted in good faith to avoid unnecessary hardship which could befall Nigerians during the yuletide season and we hope that government would make good its promise to see that those issues are resolved by Friday, December 14, 2018, as promised.
“To this, end, our disengaged personnel would be recalled on Monday, December 10 and considering the reactivation time or hitherto shut down system, all depots with fuel stock should be fully active same day.
“DAPPMAN depots are therefore advised to commence loading operations immediately and await further notification in respect of our long overdue payment.”
In the suspension directive released on Sunday, DAPPMAN had said members disengaged employees due to their inability to pay salaries.
More illegal refineries destroyed after undercover report on oil theft
Apochi Suleiman, commander of operation Delta safe (OPDS), says no fewer than 300 illegal refineries have been destroyed.
This is the second time the military will be destroying illegal refineries since TheCable’s undercover report on the activities of suspected oil thieves was published.
In the report, some of the pipeline vandals said they bribe security operatives before carrying out their operation.
On Wednesday at the Nigerian navy ship (NNS), Warri naval base, Suleiman said: “Cases of illegal bunkering, pipeline vandalism and associated criminalities do increase during major festivities and election years.
“This necessitated the launching of `OPERATION 777’ by the CDS and activated by the OPDS.
“The `OPERATION 777’ has made huge achievement as over 300 illegal refineries, 156 locally manufactured boats, 1,085 surface tanks have been destroyed.
“Additionally, 15 barges, 10 tanker trucks, 31 vehicles, 45 speed boats, 16 outboard engines, 41 pumping machines, 15 generating sets and 76 other items have been impounded.
“It is also worthy to mention that six different types of arms and over 100 items of munitions were recovered during the period in focus.
“Importantly, a wanted militant and member of `kill and bury’ gang named Gift Apollo was arrested during the operations.
“The group was responsible for the attack and death of our soldier deployed in Abua/Odua sometime in August.”
The commander said an anti-illegal bunkering/anti-illegal refining operation was also conducted at Okaki community in Bayelsa in which over 100 reservoirs and an estimated 210 metric tonnes of automated gasoline oil (AGO) were destroyed.
Navy destroys illegal N’Delta refineries — after undercover report on oil theft
The Nigerian navy is currently destroying illegal refineries in creeks across the Niger Delta region, especially Rivers state.
In the report, some of the pipeline vandals said they bribe security operatives before carrying out their operation.
“We work with navy, marine police, NSCDC and the army. Although, before, it was war, they know us now,” one of them had told TheCable.
“We do give the security operatives their own share. They will only give you problem when you are greedy, and or you move to the federal line to get crude without putting them in the know.”
But Sam Bura, commander, Nigerian Navy Ship (NNS) Pathfinder, Port Harcourt, denied the claims after taking select media houses, including TheCable, around Bille creek on Sunday.
During the trip, naval officials pulled down many structures and destroyed equipment used by the vandals.
“The Naval Headquarters (NHQ) is very worried about this allegation and that was why a high level delegation was sent to Port Harcourt to find out the veracity of this allegation,” Bura said.
“Aside from that, we also decided to invite journalists and take them to Bille to see things for themselves and carry out their own independent investigation.
“The Nigerian Navy does not have (troops) deployment in Bille, and as such, cannot be involved in any corrupt activities.”
He explained that Rivers alone has over 3,000 creeks and adjoining waterways and it may be difficult for the navy to deploy gunboats for patrol round the clock.
“We have our deployments in some strategic areas while other sister security services also have their own in other areas. So, it is a joint effort,” he said.
“However, the NHQ has done so much to provide the resources to fight maritime illegalities. Recently, the NHQ gave us 14 gunboats in addition to what we received previously.
“Operation Delta Safe – which we are a component – has also contributed equipment and personnel to operations to deny criminals freedom in the waterways.
“Also, the Rivers Government has donated 10 gunboats with other logistics support to aid the fight against illegal bunkering of crude oil.”
In August, Nigeria Natural Resource Charter (NNRC) disclosed that the country has lost at least N3.8 trillion to oil theft within the last two years. It estimated the financial value of what Nigeria has lost to be higher than the country’s 2018 budgets for health and education.
UNDERCOVER: Inside Niger Delta creeks where oil thieves feed fat after bribing soldiers with millions
Nigeria has lost more than N3 trillion to oil thieves in the last two years, according to a report Nigeria Natural Resource Charter (NNRC) released in August. Being an economy dependent on oil, the activities of these saboteurs constitute a major threat to the finance of government. To check oil theft, the government of ex-President Goodluck Jonathan engaged “reformed” militants to protect pipelines. Although, this did not lead to eradication of vandalisation, it reduced the criminal act.
The current administration, however, revoked the contracts and made new arrangements but the creek manors are still having a field day. Operating across hidden islands in the Niger Delta, the oil thieves siphon products from pipelines of oil companies in the middle of the night and refine them before disbursing to willing buyers.
Disguising as a potential buyer and at some point a researcher, FEMI OWOLABI uncovered the operations of the vandals who confessed to rendering security operatives powerless with bribes running into millions of naira.
From the Bille jetty in Port Harcourt, Rivers state, the boat snaked through sleeping rivers to the wavy sea, and after four hours traversing the waters, docked at Kalakurama, an island of about 100 dwellers — mostly fishermen, and those into the business of illegal oil bunkering.
Just a few kilometres after Bille, the largest island on the route, is the heavy presence of security operatives whose uniforms and insignia on gunboats gave out as those from the Nigerian navy. Like the experience with the police on a road journey, boats, when approaching the patrolling naval gunboats would move at slow pace, with passengers’ hands in the air for what can be described as stop and search.
Within this region where the officers are seen, are tens of high pressure pipelines— bearing the Nigeria National Petroleum Corporation (NNPC) brand— running deep into the sea.
“That’s where we get the crude from,” Opusunju, a 35-year-old man who left his driving job for illegal oil bunkering, taps this reporter gently on the shoulder as the boat sailed away from the naval officers’ muzzles.
Curiously raising an eyebrow at Opunsunju to check the possibility of beating these heavily armed security operatives to access the pipelines, he responds with a smile that suggests this, the least of worries for the oil thieves.
WE DO THIS IN THE MIDDLE OF THE NIGHT
Surprisingly, the journey wouldn’t end at the shore of Kalakurama, where teenage boys are tending to a dozen of boats filled with cans, and docked by the island. The boys, whose oily bodies glitter under the mild sun, are conversing in Hausa. Most of them had come from the northern part of Nigeria. They work here under the supervision of those in the illegal business.
“It is from here we start the journey to where we operate,” Opusunju says, as he is welcomed by Patrick, his partner. “Those boys are the ones we use to help load products from our refinery down here,” he adds.
The island, hidden between the waters, Opusunju and Patrick describe as a safe place for their business. Before now, they had operated from an island on the other side of the river, but they moved to Kalakurama when they became targets of security operatives and the original dwellers couldn’t accommodate them anymore.
“Nobody comes here except fishermen who live here and some of us who are into this oil business,” Opusunju says, untying his boat from its anchor. Commercial boats that convey passengers from Port Harcourt stop and turn back at Bille, but only a few would agree to reach Kalakurama. It is from here Opusunju, and others in the business with him, pick their own boats and head for the inlet where the crude oil is being refined. The sun is setting, and as Opusunju ignites the engine of his boat, he hands rain boot and head torch to this reporter.
“We operate in the middle of the night, but I need to go check first if we have products left to be moved.”
The operations are in stages— starting from those who burst the high pressure pipelines to get the crude oil.
“We get the crude from the federal line,” he says, making a note of the pipelines sailed past after Bille.
“There are people who would trace pipes running from under the sea to the flow-station. We then hire highly technical welders who dig deep, open the valves running with the crude oil, and connect our own pipes, diverting the crude to our loading boats.”
A loading boat, he explains, is sometimes big it has capacity to take more than 300,000 litres of the crude.
“You only need a little opening from the valve and the crude starts gushing, because of the pressure, and in one night, we can load six to seven boats. We do this in the middle of the night, because during the day Shell, who has the highest stake, are moving up and down with their chopper, looking after the pipelines.”
When the boats are loaded, the crude oil is then moved to the substandard refineries.
ONLY DIESEL IS PROCESSED, OTHERS WASTE
On fractional distillation of crude oil in a standard refinery, not less than 20 products can be produced, and this include gas, petrol, kerosene, lubricants and asphalts.
The technologies to get the best out of the crude oil, however, are not available to Opusunju and his fellow operators in other creeks the reporter visited. When the crude is brought to their creeks, it is transferred into tanks where it undergoes heating process.
After moving about 30 kilometres away from Kalakurama, Opunsunju pulls the boast over, and with this reporter, he walks carefully through the oily and marshy ground up to where tanks of different sizes are erected.
“This is our own refinery,” he begins.
There is a tank— sitting on what looks like a furnace— that collects the crude oil, and it has pipes running into the next tank that serves as a coolant— supplying water on the running pipes, and from here a lone pipe runs into the third tank that collects the product(s). The tank serving as storage, after each production, would take at least 500,000 litres of the product.
“We put the crude inside this tank we call oven or pot, and this other one water is pumped in to cool these pipes because when the crude is being cooked everywhere gets so hot.”
He explains that after hours of heating, the products are being separated and through the second tank, it comes out from the lone pipe.
“The fuel, kerosene and diesel come out as only one product which is, diesel and the heaviest,” he says.
“There is no way we can separate them, so all of the products will form into diesel, and that’s all we are after.”
After diesel has been extracted, other possible products are discharged through pipes as waste.
Spread all over the area is sediments of asphalts which Opusunju regrets they are left to waste.
“A small sack of this alone sells for N3,000, but nobody is able to come here and we can’t move them out,” he says.
“We leave other products to waste, and it is this diesel we are able to get we load into market boats to sell to waiting customers.”
Sometimes, they get kerosene but in a smaller quantity.
“In a production we may get six or seven drums of kerosene, where diesel is in hundreds of drums.”
THERE ARE MORE THAN 300 REFINING UNITS AROUND HERE
Navigating across the creeks, plumes from afar and near rent the air, and the waters had turned black— it would appear a pool of black oil. Instead of lush vegetation expected of a riverine area, the trees by the banks are dying, and this is traced to the continuous activities of the illegal refining of crude oil.
“Most of the waste we discharge finds their way into the river,” Opusunju gives reason for the contamination.
“You know we have more than 300 units of this kind of refinery here, and most of them have been operating since 2012” he adds.
Along the way, he would stop by some islands to check if they have products.
“Sometimes, if we don’t have enough products, we get from the others and they, too, do come to us when we have in abundance.”
WE WORK WITH NAVY, MARINE POLICE, NSCDC AND THE ARMY
The area is not easily accessible to those who are not in the know of the business. This reporter had posed as a potential buyer who wants the product in large quantity, and it took days of back and forth discussions before an agreement was reached.
At short intervals as he sails, Opusunju brings out his telephone to make calls, and he is heard asking, “is the coast clear?”
After two weeks that he has been out of the creeks, he explains, it is important to keep in touch with those inside so their movement is guided, especially when the news before leaving Bille jetty is that, “new federal troops are on the water”.
“We know those that are there, but when we hear they have brought in new ones, we would try and play safe,” he says.
“You know, this thing we are doing is illegal business and we must be careful,” he admits, saying it is such a profitable business, of course, with its high risks. “It costs about N15 million to set up a refining unit, but in one week of full production, one will make almost a double of the money,” he says.
Things, however, have been running smoothly for them because they have to their side security operatives deployed to watch over the crude oil pipelines.
“We work with navy, marine police, NSCDC and the army. Although, before, it was war, they know us now.”
When a helicopter belonging to the Nigerian navy flies over the water, Opusunju wouldn’t raise his head. he keeps his clam, and laughs. “They see the flames and they know we are illegally cooking crude oil.”
For Opusunju and others, the matter is already handled as long as you ‘settle’ the security operatives.
“We do give the security operatives their own share,” he says. “They will only give you problem when you are greedy, and or you move to the federal line to get crude without putting them in the know.”
To move a loaded barge to and fro, the oil thieves say, they pay up to N1 million to ‘settle’ security operatives on duty. Barges are moved on a weekly basis, giving the operatives an avenue to illegally rake in millions.
ILLEGAL REFINED PRODUCTS DO NOT HAVE THE REQUIRED NUMBERING
Akuma Oji, a technical assistant at the centre for gas refining and petrochemical (CGRP) at the university of Port Harcourt, tells TheCable that they’ve known about the oil theft in the area as far back 2008.
“We felt they take crude, and initially we didn’t know what they do with it,” he explains.
“We later found they take the crude and sell them off. Super tankers from abroad would come and life them to other countries. It was an assumption though, that those people come to buy them at cheaper rate.”
Within 2010 and 2011, Oji says they started noticing how the business of illegal refining of crude was now on the rise. The researchers were carrying out an environmental impact study in the areas where oil companies operate when they saw this.
“We know they used to refine in creeks far from where people are, and the military had always tracked them, destroying the facilities. But recently, the activities are happening even in nearby places and it is like a compromise on the part of the security operatives.”
He explains that the crude oil contains many fractions, and when properly refined, gasoline is obtained from the light end and others from the heavy end.
“But since those in the creeks do not have the separation techniques, they just waste other things after getting diesel.”
Apart from the effect on the environment, Oji says the product from the illegal refineries is not good for engines.
“By blend, this product doesn’t have the required numbering. There are light and heavy diesel, but these guys can’t differentiate, they only keep heating the crude and wouldn’t know when the light diesel had gone.”
In the standard refinery, catalysts are added in the heating process for effective separation of the products.
“Thermal conversion will separate the fractions, and catalytic conversion cause the heavy fractions to turn to light and instead of having those residuals.”
Oji says what illegal refiners are able to get is just about 30% from the whole, and this is, definitely having an effect on Nigeria’s economy.
The academic, however, suggests the way out is for the government to reach an agreement with those involved in the illegality.
“It may be difficult for the government to stop this, because people are daily joining in this business. Even the military guys are taking their own share and using force might not work again. I believe we can train these guys and help them improve.”
In 2017, the government had announced that 10 modular refineries were being developed in Akwa Ibom, Cross River, Delta, Edo and Imo states. With a refining capacity of 300,000 barrels, the government said it would ensure self-sufficiency of petroleum products while serving as a disincentive for illegal refineries and oil pollution.
But the project is yet to see the light of the day.
THE THRIVING BUSINESS
Nigerian refineries are mostly non-functional, and a considerable number of filling stations across Rivers and Bayelsa states rely largely on products from the ‘river.’ Products are loaded in barges, different sizes of boats and moved to the shores in Port Harcourt and other places for delivery.
Tankers come as far as Kano and Kaduna states to get products from the illegal refineries down the south.
“It is always available and cheap,” a tanker driver in Port Harcourt says.
Before leaving for Kalakurama, Opusunju would check on one of his customers around Borokiri area of Port Harcourt whom he says was owing about N2 million, money for products delivered to her weeks ago.
Every corner in Borokiri are stores stocked with these products and transactions are ongoing without interference of police who are expected to check on the illegal activities.
Behind the police station in the Marine Base area of Port Harcourt is a flowing river whose bank serves as another oil trading hub. Strangers, when noticed, are quickly accosted by some teenagers, pulling them to their side, and giving the prices of what they have in stock.
The products here are, mostly, diesel and kerosene.
As early as 7am, a particular model of Toyota Camry cars waits by the riverbank to load products. The products are carefully emptied from the drum into large size nylons, tied and put in the boot.
At the entrance of Okrika town, just opposite the Port Harcourt refinery, is an array of women and men with different sizes of flat-sided containers filled with the products. Motorists, small scale business owners are regular visitors of Hilary, a middle-aged woman whose rack is located by the pipes running into the refinery opposite her.
“We get our supply, mostly from the river,” Hilary says, admitting the products are from illegal refineries
NIGERIA ON THE LOSING END
In August, NNRC disclosed in its report that the country has lost about N3.8 trillion to oil theft within the last two years. It estimated the financial value of what Nigeria has lost to be higher than the country’s 2018 budgets for health and education.
“Over the last decade, oil theft has risen to unprecedented levels, peaking between 2011 and 2014. The inability of the government and oil companies to curb this epidemic has made Nigeria the country most plagues by oil theft in the world,” the report read.
In 2015, Vice-President Yemi Osinbajo had said Nigeria loses about 400, 00 barrels of oil daily to thieves and this amounts to about N4.8 billion. The vice-president had promised that the government would priotise the security of the oil sector, but not much has been achieved.
At a programme in June, Ibe Kachikwu, minister of state for petroleum resources, spoke on the need to check the activities of those perpetrating this act.
“For the fact that vessels can actually come through the security corridors and pick up oil is even much more troubling. It may not have been oil, it may have been arms. Something needs to be done in terms of security and environment as well as the economy of the country.” he had said.
Poverty, unemployment and poor governance, NNRC, in the recent report, identifies as major reasons for the emergence and sustenance of oil theft in Nigeria.
WE WILL INVESTIGATE— NIGERIAN NAVY
While Ndu Ughamadu, NNPC’s spokesman says he would get back to TheCable, Paul Osu, his counterpart at Department of Petroleum Resources (DPR) wasn’t reachable.
Both Omoni Nnamdi, police spokesman in Rivers state and Emmanuel Okeh, spokesman of the Nigeria Security and Civil Defence Corps couldn’t be reached as their telephone lines were switched off.
Ayo Olugbode, the navy’s spokesman, however, says the illegal activities will be investigated.
“We have always been on the look for those into the illegal bunkering,” he tells TheCable.
“When we have information on the exact location, we will move in and get them. It is not true that the authorities help these oil thieves. It is always in the media that we are arresting them. With this information, we will get on this and I assure you they will be dealt with.”