Nigeria’s Oil and Gas Landscape: Addressing Security Concerns for 2024 and Beyond.
Nigeria is endowed with vast oil and gas reserves, which account for over 90% of the country’s export earnings and around 70% of total government revenues. However, the promising potential of Nigeria’s oil wealth has been severely undermined by the escalating crisis of crude oil theft, pipeline vandalism, and sabotage of critical energy infrastructure.
According to the 2023 Global Terrorism Index report by the Institute for Peace and Economics, Nigeria is ranked as the eighth most insecure country globally. This heightened level of insecurity is apparent in various activities, including the presence of groups like Boko Haram in the northern regions, elevated rates of kidnappings spanning different areas, the conflict involving IPOB in the east, frequent occurrences of armed robberies, and ongoing conflicts between herders and farmers.
The hotspots of crude oil theft are located across the Niger Delta region, where most of Nigeria’s onshore oil production takes place. The creeks and swamps provide ideal cover for criminal networks to tap into pipelines and siphon off oil into barges, with makeshift local illegal refineries dotted across the region as well to process stolen crude oil into low-quality petroleum products for local sale or smuggling.
The scale of crude oil theft in Nigeria has reached an unprecedented level. By some estimates, Nigeria is losing approximately 400,000 barrels per day of oil, worth over $31 million daily, to oil thieves. According to NUPRC, between January to September 2022 alone, Nigeria lost $2.4 billion worth of crude oil to thieves, compromising energy security, and depriving the country of much-needed revenues. Also, Illegal crude oil theft has reached alarming levels in Nigeria. Data from Nigeria Extractive Industries Transparency Initiative (NEITI) reveals over 7,000 pipeline vandalism cases occurred between 2009 and 2020, resulting in losses worth over N4.3 trillion. In 2022 alone, an estimated 200,000 to 400,000 barrels per day have been stolen, causing over $10 billion in losses.
The severe pipeline losses from theft forced some companies to curb oil production and shut-in fields. In 2022, Shell declared force majeure on crude exports due to massive theft from its Nembe Creek pipeline. ENI/Agip also declared force majeure on exports from its Brass terminal. Overall Nigeria’s oil production fell below 1 million barrels per day in 2022 compared to averages of 1.5 million bpd before the COVID pandemic.
With the rapid rise in global oil prices since 2022, the economic incentives for theft have grown. Simultaneously, high levels of unemployment, poverty, and underdevelopment in the Niger Delta have led to the alienation of communities, pushing numerous youths into involvement with oil crime syndicates. Additionally, there has been a noticeable increase in the participation of security officials, politicians, and community leaders in facilitating oil theft as oil bunkering provides resources for militant groups and gangs engaged in other criminal activities, which further deteriorates our onshore security.
The decline in oil production directly impacts government revenues as Nigeria is unable to meet its OPEC quota. Losses from theft are estimated to cost the government over $1 billion in revenues monthly. This has been a severe blow for a country still recovering from economic losses induced by the COVID-19 pandemic.The reduced oil revenues also constrain Nigeria’s capacity to invest in infrastructure and social development. With the government struggling to meet payroll obligations, the oil losses derails government budgets and developmental programs, further exacerbating Nigeria’s fiscal challenges.
Without fresh investments in technology, infrastructure, and new fields, production will continue to face challenges, as the IOCs (International Oil Companies) that once dominated Nigeria’s oil fields have been divesting assets. The indigenous producers, however, lack the financial strength and technical expertise needed to reverse the decline. Moreover, investments are unlikely to materialize due to constant threats of sabotage, theft, and disruption.
Furthermore, environmental damage from oil theft is immense. Vandalism and sabotage result in oil spills that pollute lands and waters. Individuals are exposed to toxins, fishing and farming livelihoods are destroyed, and mangrove ecosystems face ruin. Highly sophisticated criminal networks with insider collusion from security agencies and local communities operate illegal taps on pipelines deep in the creeks, causing massive environmental damage from spills and explosions at illegal refining sites. Between January to June 2023, Nigeria recorded 6,000 oil spills caused by theft and sabotage. Unauthorized local refining creates extensive pollution. Carbon emission levels rise sharply due to leaks from theft and damage.
However, the Nigerian government has made significant strides in addressing the challenge of oil theft by implementing various strategies. Notable achievements include:
To safeguard strategic energy infrastructure assets such as the Trans-Forcados oil pipeline, special security forces were deployed, leading to positive outcomes. Troops cracked down on theft, restoring output of 150,000-210,000 bpd Forcados terminal.
In collaboration with IOCs, efforts were made to combat theft and vandalism through the launch of aerial surveillance and tracking. Helicopter and drone monitoring proved effective in detecting and addressing illegal activities.
To enhance intelligence on theft operations, partnerships were established with local communities.
Engaging communities through corporate social responsibility programs facilitated information sharing, and critical infrastructure in these communities was also fenced.
Several suspects, including alleged kingpins in large-scale stealing were prosecuted.
Efforts were made to seek regional cooperation within the Gulf of Guinea to counter international oil theft networks. Agreements were signed with regional naval chiefs to curb maritime smuggling.
Temporary bans and closures of leaking pipelines were implemented to prevent losses, as evidenced by the temporary halt of Forcados terminal exports in 2022 during repairs.
A strategy involved withholding oil revenues from state governments linked to theft, exemplified by holding back revenues from Rivers State. This approach aimed to disincentivize local collusion in oil theft activities.
Looking forward, the government could further emphasize sustainable development initiatives in the Niger Delta to address underlying issues of unemployment, poverty, and underdevelopment. This comprehensive approach may contribute to reducing the factors that drive individuals toward engaging in oil theft.
Additionally, investing in advanced technology for continuous monitoring and surveillance of oil infrastructure could strengthen preventive measures and early detection of potential spills.
Regular training and capacity building for security forces and relevant agencies would also enhance their ability to respond effectively to oil theft incidents and mitigate environmental damage.
Public awareness campaigns and community engagement initiatives could foster a sense of responsibility and environmental stewardship, encouraging local communities to actively participate in the protection of natural resources.
Nigeria’s worsening crude oil theft crisis is a complex threat that requires coordinated action on improving security, law enforcement, governance, infrastructure management and sustainable development. With political will and prudent policies from the present administration, the menace of oil theft can be substantially reduced to ensure Nigeria benefits from its vast energy wealth. However, until conditions enabling oil crime are addressed, the theft epidemics will likely persist, to the detriment of Nigeria’s energy security, economy and people.
