Oil Theft and Criminal Cartels

The Verdict By Olusegun Adeniyi.

At the public presentation of the 2009-2011 audit report of our oil and gas industry on Monday, the National Extractive Industries Transparency Initiatives (NEITI) governing board Chairman, Mr. Ledum Mitee, disclosed that Nigeria lost over $10.9 billion worth of crude oil to thieves within the period. Unfortunately, it would seem that the sustained pillaging of our national resources is a problem that will not go away. I make this point knowing that the NEITI current submission reflects the repeated positions of all actors in the sector for more than a decade now. Today, I reproduce for the readers’ attention and evaluation a column written some nine years ago on this page and on this same matter, complete with the dire implications for our economy and national security. What is worrisome about the recollection is that it might as well have been written after the last NEITI report:

23 September, 2004: The United States-based Human Rights Watch, in a recent report, stated that oil theft accounts for 10 percent of Nigeria's daily production. Describing illegal oil bunkering as Nigeria's most profitable private business since it is estimated to yield between $750 million to $3.5 billion annually (depending on the season), the report also stated that the violence being witnessed in the Niger Delta has a direct link to the illegal business: "Oil has become literally the fuel for the violence-despite the fact that in theory it should be easy to stop its theft (it is hard to hide a tanker and easy to trace its owner)". The Human Rights Watch is wrong here. In a nation where big vessels "disappear", bunkers are not that hard to hide! But the report gets interesting when it talks about the modus operandi and those believed to be involved and I want to quote more extensively:

“Illegal oil bunkering-long prevalent in the Delta-has become a sophisticated operation that no longer requires the cooperation of oil company staff to operate equipment at wellheads or allow access-though there are still reports that they are involved. The bunkerers tap directly into pipelines away from oil company facilities, and connect from the pipes to barges that are hidden in small creeks with mangrove forest cover. Frequently, both in the riverine areas and on dry land, the police and military are involved in the process or are paid off to take no action against those tapping into pipelines. In November 2001, the Nigerian federal government set up a Special Security Committee on Oil Producing Areas, ‘to address the prevailing situation in the oil producing areas which have, in recent past, witnessed unprecedented vandalisation of oil pipelines, disruptions, kidnappings, extortion and a general state of insecurity.’ Reporting to President Obasanjo in February 2002 (in a report that has not been published), the committee noted that a ‘major threat to the oil industry ... arises from the activities of a 'cartel or mafia', composed of highly placed and powerful individuals within the society, who run a network of agents to steal crude oil and finished product from pipelines in the Niger Delta region.’ The committee indicated that many of the militant youth groups responsible for halting or diverting oil production and preventing free traffic on the waterways ‘could be enjoying the patronage of some retired or serving military and security personnel.’ Despite this high-level recognition of the seriousness of the problem, there appears to be no proactive government strategy for investigating the organized illegal oil bunkering rackets. There have been some seizures of the vessels involved. More than nineteen vessels used in the illegal bunkering business are reported to have been seized by the army and navy in the year to July-though it is often not clear what happens to their cargoes thereafter...”

According to media reports, now confirmed by the authority, MT African Pride, one of the 15 vessels arrested for alleged bunkering in August last year (2003), and carrying 15,000 barrels of crude, is missing. Testifying before a House of Representatives Committee, the Chief of Naval Staff, Vice Admiral Sunday Afolayan, said his men were helpless to arrest what he called "practice of topping", obviously the Naval euphemism for oil theft. He blamed the Police for this sudden disappearance of a vessel on the high sea, arguing: "It is my responsibility to arrest the ship and another to prosecute. I have made arrests and handed over and it is not my duty to do anything beyond my constitutional duties."

Probed further, Afolayan said there was a directive in January this year (2004) from President Olusegun Obasanjo to the effect that the vessel should be handed over to the police for prosecution after the cargo had been taken away by the NNPC. Those who attended the said meeting were Nuhu Ribadu, Chairman of the Economic and Financial Crimes Commission (EFCC); Funso Kupolokun, Group Managing Director, NNPC; and the Police IG, Tafa Balogun. Afolayan, in the course of his testimony at the House (where we got to know another vessel, M.T. Jimoh, has also disappeared) said the Navy had begun an in-house probe into the matter resulting in the court-martial of some officers and ratings over their alleged roles after pushing the blame on the Police. But the Naval Chief did not have the last say on the matter.

Balogun, in his testimony, said that consequent upon the directive of the President, he set up a panel led by DIG Ogbonna Onovo (who would later become IGP) to take custody of the vessel and suspects but the Flag Officer Commanding Western Naval Command, Rear Admiral Bob Manuel, refused to oblige them on the grounds that he was yet to be briefed by Afolayan. However, when the investigating team returned to Abuja to express their complaints, a copy of a signal from one Agbiti with number NHQ/MS0/00/05/02/04 was handed to them by the Naval Headquarters. At about the same time, according to Balogun, another letter was issued to the police stating that the Navy would take custody of the ship but would release the suspects.

Said Balogun: "MT African Pride, reported missing by the Navy was never, and I repeat, never in the custody of the police. At no time were any of the ships taken over by the police. It is not even a question of MT African Pride, all the vessels have always been with the Navy. If anybody says he handed over a ship to me, let him produce the handing over note because there is no way the handover of such magnitude can take place without a handover note. The vessels in question were at the high seas where the police have no access to them. The Navy deployed helicopters and ships to trace the MT African Pride and it was on the pages of newspapers that I read it. If the ship had not been in their custody, why did they deploy ships and helicopters to search for it?"

Without prejudice to the work of the House Committee, it must be noted that we are not just talking about a missing ship here. We are actually talking about the theft, corruption and mismanagement of our oil wealth, aided and abetted by officialdom and the implication for our economic well-being and national security. I repeat, nobody should confuse the issue here, this matter is about oil, not ship. And in another country where leaders are actually accountable to the people, several public officials would have lost their jobs by now, assuming they are not already in jail. But because this is Nigeria, we have a situation in which arrested vessels carrying stolen oil just 'disappear' into thin air and the Naval Chief can only tell us some cock-and-bull story!

Since the ugly development broke, I have had time to speak to several people in the oil sector as well as in the Navy and I am privy to some damning reports. I also have it on good authority that the Navy has on several occasions in the last one decade arrested vessels carrying stolen crude but up till now, there has not been one single prosecution of these criminals. The oil majors have also written several reports to the government on the activities of these illegal bunkerers sometimes mentioning names and pointing out the danger of their activities since a large chunk of their 'returns on investment' go into the purchase of arms. But nothing happened. And we should get the fact right: what we call illegal bunkering is simply armed robbery in that arms, sophisticated ones for that matter, are used to dispossess Nigerians of our commonwealth by some unscrupulous, but obviously highly placed, elements. And now that some vessels are in custody of the Navy and should help in the investigations, assuming anybody is really interested in investigations, they are now conveniently "missing".

Whichever way one looks at the Nigerian condition today, one cannot but agree with the conclusion reached in the July 2003 IMF Working Paper titled “Addressing the Natural Resource Curse: An Illustration from Nigeria”. It reveals that over a 35-year period Nigeria's cumulative revenues from oil (after deducting the payments to foreign companies) have amounted to $350 billion at 1965 prices yet only few people feel the impact of this huge wealth.

The authors, Xaxier Sala-i-Martin, a professor of Economics at Columbia University and Arvind Subramanian, an Advisor, Research Department, IMF argued that on just about every conceivable metric, Nigeria's performance since independence has been abysmal essentially because of oil. Check out the statistics: While Nigeria's Per Capita GDP was US$1,113 in 1970, it had declined to US$1,084 in 2000 which places the country among the 15 poorest nations in the world. The poverty rate, measured as the share of the population subsisting on less than $1 per day, increased from 36 percent to 70 percent which in practical terms means the number of the poor has moved from 19 million in 1970 to 90 million today. "In 1965, when oil revenues per capita were about US$33, Per Capita GDP was US$245. In 2000, when oil revenues were US$325 Per Capita, the Per Capital GDP remained at the 1965 level. In other words, all the oil revenues did not seem to add to the standard of living at all. Worse, however, it could actually have contributed to a decline in the standard of living."

The objective of the 44-page report, according to the authors, was to demonstrate that corruption, weak governance, rent seeking and plunder are problems intrinsic to most countries that own mineral resources, especially oil. In the light of recent developments, I think the authors may have to review their report because they have only scratched the surface where the Nigerian oil asset is concerned. The rot is much deeper than they, or anybody, can ever imagine. But it is unacceptable.

POSTSCRIPT: The above column, titled “MT Abracadabra”, and published some nine years ago, highlighted the challenge of oil theft in our country which seems to have defied solutions.Yet it is instructive that as at the time I wrote the piece in September 2004, Nigeria was said to be losing about ten percent of its oil revenues to thieves. Today, the figure has jumped to between 20 and 30 percent. The essence of this recollection therefore is to ginger the authorities on the need to find solution to a problem that is fast getting out of hands, especially given recent revelations, including from Finance Minister and Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala, that Nigeria today loses about 400,000 barrels of crude oil per day to these same criminal gangs.

Unfortunately, rather than confront this challenge frontally, the relevant authorities are playing politics with it. Just recently, the Director General of NIMASA, Mr. Patrick Akpobolokemi said: “There are some big vessels under my custody belonging to organised piracy and crude oil thieves. Very soon, I will release all the big names in the syndicate. Once I do that, people should not come and say it is ethnic cleansing or that it is 2015.” While Nigerians wait for Akpobolokemi to make god his threat by revealing the names of the people helping themselves to our oil wealth, nobody is putting him to task on the issue that impinges not only on our economy but indeed, our national security. Any wonder then that these criminal gangs have been so emboldened as to now corner to themselves almost a quarter of our national oil production, on a daily basis? Yet, as I stated nine years ago, this is clearly unacceptable.

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