How Nigeria Can End Oil Theft, Lessons From Mexico

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With 200,000 barrels stolen every day and having lost $ 1 billion in Q1 of 2022, the Nigeria oil theft market has continued to boom. In 2020, Nigeria lost N15.71b worth of crude oil, this number skyrocketed to a whooping N1.67tr in 2021.

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These numbers imply that Nigeria is on course to lose more than what it lost in 2021, and this poses a great danger. With $ 1 billion (N623 billion) already lost in Q1 of 2022, this represents almost 50% of what was lost in 2021.

According to reports, with 200,00bpd stolen, amounting to 73m barrels per year, and $55 per barrel, Nigeria lost N1.67 trillion in 2021. With soaring oil prices at over $100 per barrel, reports have shown that an average of 250,000bpd is stolen now. This means Nigeria stands to benefit little or nothing from high oil prices.

Anatomy of Oil Theft in Nigeria 

Oil theft in Nigeria ranges from small scale to large scale, depending on the port or station, size of pipeline, and people involved, among other factors. Oil theft, also known as illegal bunkering, is not a new menace in the oil and gas sector, it dates back over two decades ago. This system involves a large chain of individuals which includes security operatives, and individuals from all walks of life, all having different roles to play. 

The Lesson from Mexico 

The moribund nature of Nigeria’s refineries has made it possible for oil theft to thrive. Nigeria currently produces 1.02mbpd which falls short of OPEC’s valuation of 1.753bpd for May 2022. According to GMD/CEO of NNPC, Mele Kyari, Nigeria can produce 2.49mbpd. 

How Nigeria Can End Oil Theft, Lessons From Mexico

In Mexico, president Andrés Manuel Lópes Obrador led a comprehensive military crackdown on “huachicol” (organized criminals that sell stolen gas). According to reports, the strategy involves collaboration between the military, national guard, and local authorities to perform surveillance, catch thieves red-handed and seize contraband oil. This approach is intensified and has seen stolen gas reduced from 81,000 barrels per day to 5,000 barrels per day.  

In Nigeria, a heavy military clampdown is needed to ensure success in the fight against oil theft. In April 2022, the Nigerian Navy launched OPERATION DAKATAR DA BARAWO(OPDDB) “stop the thieves” to fight oil theft. Nigeria can take a lesson from Mexico and extend the formation beyond the Nigeria Navy. The local who is well vast of the environment should be involved in the fight. Also, a clampdown on the leaders of the gang should be made like it was done in Mexico, this will help in stopping the movement of such gangs. 

Another lesson from Mexico beyond militarization is the need to fire individuals involved in oil theft. In Mexico, president Lópes Obrador wasted no time in firing PEMEX (Mexico national petroleum corporation) workers who were involved in theft, a similar strategy should be adopted to boot out any government or NNPC official involved in oil theft.

Furthermore, Mexico ensured it traced and closed accounts of businesses trafficking in stolen gasoline, the government through the apex bank, CBN, and other financial institutions should be involved to report, trace, and close down accounts that get proceeds from oil theft. Also, in Mexico, gas stations involved in stolen gasoline had their license revoked. A considerable amount of oil stolen in Nigeria is refined illegally and sold to citizens. These individuals do so with the help of fueling stations that buy them, any station caught in the act should have their license revoked. 

Beyond Mexico, what Nigeria can do 

Modular Refineries  

Another way Nigeria can stop oil theft is the creation of modular refineries. Despite having a combined installed capacity of 450,000 Nigeria does not refine a litre of oil. Creating modular refineries will help in taking petrol to the consumers, instead of moving it to different ports.  

Increased Technology 

The technology around pipelines and oil wells should be increased. The technologies will help in monitoring the flow of oil at the start point, and at different points, making it easy to track where oil has been vandalized. 

Improving CSR 

Multinationals should increase their Corporate Social Responsibility (CSR). Over the years, there have been issues arising from oil exploration, this has caused issues such as environmental degradation, and pollution, among others. There have been promises made with little effort, improving it will help and see the locales act as agents in the fight against oil theft. 

Partnership 

The government should go into partnership with governments of countries where oil stolen is suspected to be bought. This will help in creating international laws that will border the flow of oil from such countries and help in tracking finances too. 

Cutting the Market and Supply Chain 

Oil theft has been strengthened due to the availability of a supply chain. The government needs to identify the supply chain of oil theft and identify the individuals involved. The individuals who are at the receiving end should be identified and brought to book. Targeting those who patronize stolen oil will curb oil theft as oil bunkerers will have no one to sell to.