Nigeria loses major investors

2021 ended with the report that Nigeria ran a deficit of nearly 200 million barrels of crude oil in the first 11 months of the year, largely due to oil theft. But these experiences are all too common and not limited to Nigeria. Year after year we see huge oil losses due to theft.

Oil theft in Nigeria is fueled by several factors. The outdated infrastructure, e.g. B. the oil pipelines, makes it easier for thieves to gain access to crude oil. In addition, due to general underinvestment across the sector and poor security of the country's waterways, little is being done about the crime. Some security agencies even work with cartels to get the profits.

While Nigeria is hoping to meet its OPEC quota of 1.68 million bpd of crude oil by January 2022, this type of crime is making it increasingly difficult. Nigerian production has been closer to 1.25 million barrels per day for the past few months, which shows how difficult it is to meet this target.

And the high number of oil thefts drives international investors away. As the problem persists, the big oil companies are shifting their money to more reliable markets with better control and surveillance practices. Shell, ExxonMobil, Chevron and Total have already relocated their activities to other regions, although Nigeria is the largest producer in Africa.

These thefts represent a loss of revenue of $ 3.5 billion in 2021 alone, or around 10 percent of the country's foreign exchange reserves. Nigeria is believed to have lost 42.25 million barrels in 2019 and 53.28 million barrels in the previous year to oil theft. So it seems clear that the situation is getting worse, partly due to economic hardship during the pandemic, but also easy access to outdated pipelines and widespread corruption.

The Nigeria Extractive Industries Transparency Initiative (NEITI), the auditor of the Nigerian oil industry, published a report in 2019 according to which the OPEC state has lost around 138,000 bpd of crude oil worth USD 40.06 billion to theft over the past ten years.

In September last year, the Nigerian government set up a Committee on the Recovery of Crude Oil and Illegally Refined Petroleum Products. The group included the Ministry of Petroleum Resources, the Nigeria National Petroleum Corporation, the National Oil Spill Detection and Response Agency, the Nigerian Army and Navy, and the Nigeria Security and Civil Defense Corps. However, Nigeria continued to suffer major losses for the remainder of the year.

Despite previous discussions on how to prevent this situation from continuing, few investments have been made to stop the trend. For example, it was unwilling to fund technology that could monitor oil and gas pipelines across the country to detect sabotage or human interference and prevent theft.

And that after years of widespread oil theft in Nigeria. In November 2015, thieves stole crude oil worth $ 250 million, or around half a billion liters, from a single pipeline. As Africa's largest oil exporter, it is vital that the government and the oil industry pull together to contain this costly trend before it gets worse.

But this problem is not unique to Nigeria. Although most of the oil comes from Nigeria, the effects of the crime are spreading to other West African countries, according to the UNODC. The cartels in the Niger Delta region typically steal crude oil by "hot tapping"; H. connecting a second pipeline to a main line, or by "cold tapping", d. H. blowing up a pipeline and replacing it with your own. They then illegally export this oil to countries like Ghana, Cameroon, Ivory Coast and South Africa. Some quantities even reach the international market. This is where corruption comes into play, as the oil tankers are often overcrowded and the exporters bribe officials who control the transport of the product to turn a blind eye.

While Nigeria isn't the only country facing oil theft directly - there have been case studies of Ghana, Morocco, Uganda, Mozambique, Mexico, Thailand, Azerbaijan, and Turkey, to name a few - it suffers on average By far the greatest losses. Because of the lucrative nature of the crime, it is all the more common in poorer countries. For example, in 2009 a cartel could make $ 90,000 by tapping a Mexican pipeline for seven minutes to get the refined oil.

While oil theft averaged 70,000 bpd of crude oil production across the industry in August 2020, losses in Nigeria were significantly higher. Even if oil production remains high, the government and the oil industry must tackle the crime by better monitoring and rating the pipelines if they hope to attract more foreign investment into the industry. After Nigeria lost funding from some of the world's largest oil companies and suffered a decline in production volumes following the pandemic, the country is in a difficult position as OPEC increases its quotas. A reduction in oil theft could greatly assist the further development of the Nigerian oil industry.