The trade in stolen crude led to a 17% drop in official oil sales in April – equivalent to around 400,000 barrels a day and a whopping $1.2bn (£772m) lost in a month, reports BBC
The vegetation ended abruptly and the colour of the landscape turned from green to black. I was getting a rare look at the booming trade in refined stolen crude oil in southern Nigeria.
“Here is our business place,” a man, who did not want to give his real name but asked to be called Edward, told me as we walked around a remote, heavily polluted palm-tree fringed creek in Ogoniland in the Niger Delta.
“We use these to go and collect our natural resources – our crude oil,” he said, pointing to a locally carved boat lying on its side.
In the middle of the night, to avoid detection, they break into the multinational oil companies’ pipelines and help themselves.
Dotted along the creek were dozens of large drums used for boiling up the crude oil.
They had pipes protruding from them leading to troughs into which the products are collected; kerosene and petrol for the local market and diesel which is taken away on barges or inland on trucks by traders.
Next to each home-made refinery are pits full of bitumen which is sold to road construction companies.
“Almost 400 people work here and every night we produce around 11,000 litres of diesel,” said 32-year-old Edward, adding that his elder brothers had learnt all about the business in Bakassi, near the Cameroonian border with Nigeria.
The work is dangerous.
They have to be extremely careful to ensure the waste product – gas – does not ignite and cause an inferno.
“It is so dangerous but there is nothing else we can do in order to make a living,” said a 25-year-old man who asked me to call him Andy.
“Many of our brothers have died and are injured. We also get diseases from it and get rashes on the body.”
I was told the last fatality was in 2011.
The military is supposed to be stopping all this and some operations have been disrupted but the effort is seriously hampered by the desire to get in on the action.
“We settle with the army people. If they see money in your hand they will take that,” Edward said.
“If not they will take products from you. If we have 10 drums we will give them two,” he said, adding, “It’s very normal.”
Nigerian Finance Minister Ngozi Okonjo-Iweala told the London Financial Times recently that the trade in stolen crude had led to a 17% drop in official oil sales in April – equivalent to around 400,000 barrels a day.
That is a whopping $1.2bn (£772m) lost in a month. This includes oil that was not stolen but stayed underground as a result of shut downs due to break-ins.
Shell puts this figure for the entire Niger Delta at around 150,000 barrels per day.
The huge discrepancy is a sign of how difficult it is to get the facts in the murky world of Nigerian oil.
Oil theft is not new here. Before the 2009 amnesty that pacified the Niger Delta, militants used to break into the pipelines to get money to buy weapons.
The peace has enabled the oil companies to significantly increase their oil production – which means much more money for the government.
So for now the oil theft might be seen as a relatively minor irritant.
But how wise is it to allow lawlessness to continue in an already neglected, fragile region of Nigeria so critical to the nation’s economy?
The government is setting up a task force which will also include officials from oil companies as well as the military.
But few analysts expect concrete action – too many people are benefiting, including former militants.
Most of the stolen crude is pumped straight from the pipeline onto barges which then transfer the valuable load onto ships waiting off shore – an operation known as bunkering. These ships then head to refineries around the world.
“It is a huge problem and it is only getting worse,” says Philip Mshelbila of Shell Petroleum Development Company of Nigeria.
“For us we lose somewhere between 40,000 and 60,000 barrels a day to crude theft and this is only what is lost in the metered sections of our pipeline. The large proportion we think ends up in refineries around the world.”
The oil companies’ hands are tied, as they do not have the power to arrest anyone or to intervene.
They have to rely on the military response, which is clearly ineffective.
It is widely believed that powerful politicians are also involved in the business.
Shell says in an effort to stop the theft it is now constructing its new pipelines 4m underground and is covering them with a slab of concrete.
It is also laying pipes within “false pipes” to make the work of the men with hacksaws harder.
In addition to the impact on its profits, Shell is also keen to point out the environmental damage caused by the oil theft and illegal refining.
This is an issue for which Shell itself has been lambasted following numerous well-publicised oil spills of its own.
Last week Nigeria’s oil regulator proposed fining Shell $5bn over a 40,000 barrel oil spill in the Atlantic Ocean last December.
I flew with officials from Shell over some of the affected areas of the Niger Delta.
From the air you see not only the scale of the oil theft – there are dozens of similar sites to the one I visited – but also the oil sheen on the water and the complex labyrinth of creeks and channels which the men involved in the illicit business use to their advantage.
“They are quite brilliant at it. They are hard to detect because there are so many creeks, you can’t block all of them and these guys are native to the area – they know all the creeks,” said Mpaka Jack, who is in charge of surveillance of the Shell pipelines.
The company has contracted more than 9,000 people to keep watch of the pipes but it admits there is a possibility that some of these workers turn a blind eye for a cut of the illegal business pie.
“If the military Joint Task Force is really committed and with help from the communities we can bring this to the barest minimum. But without that commitment it won’t happen because it is like a business in the community – even some of the chiefs are involved,” Mr Jack said.
Back at the refinery Edward and his brother Andy headed home to get some sleep before another night shift.
Both men said they would like to find a way out of the business but saw no options in an area which has seen little development despite the billions of dollars that were pumped from the now abandoned Shell wells dotted around the village.
“I finished my secondary school with two A grades and seven credits. But I had no financial support to continue my education so I’m just doing this business with my brothers,” said Andy.
It seems somewhat ironic that in a place so rich in resources, poverty is trapping people in this dangerous, illegal business.