The Political Economy Of Illegal Bunkering In Nigeria By Kombo Mason Braide (PhD) Port Harcourt, Nigeria Demonise & Diabolise: The Niger Delta has been a source of illicit international business deals (like the trans-Atlantic slave trade), as far back as the 15th century. Today a new form of syndicated criminal proclivity is threatening the very foundations of Nigeria’s petroleum industry, and by extension, the Nigerian economy, as well as putting tremendous pressure on Chief (General) Olusegun Obasanjo.
That problem is the “illegal bunkering” of crude oil and/or its derivatives. The term “bunkering”, (whether legal or illegal) has been thoroughly abused, demonised, and misused in Nigerian parlance, so much so that the mere mention of it readily evokes, connotes, or triggers subliminal suggestions of grand illegality in the Nigerian paradigm. For example, when petroleum products pipelines get cannibalised, the Nigerian mind very effortlessly visualises “illegal bunkering” in progress.
When shiploads of crude oil (from refineries) get stolen, and are routinely sold off as low-pour fuel oil (LPFO) – a relatively cheaper commodity in the international oil markets – Nigerians simply smile, and know, at the very bottom of their very naive hearts, that “illegal bunkering” has definitely taken place. While in the Nigerian worldview, “bunkering”, (whether legal or illegal), is synonymous with stealing petroleum (or/and its derivatives), in Oxford English, “bunkering” is a legitimate process whereby a duly licensed operator provides fuels, water, and lubricants (bunkering services) for marine vessels on request.
Simply stated, “bunkering” is the fuelling of ships. It is like having a floating fuel service station on the high seas, or at coastal jetties, to fuel, or/and supply provisions for ships. Bunker fuel consists mainly of automotive gas oil (AGO), which has been perennially scarce in Nigeria, and low pour fuel oil (LPFO), an environmentally unfriendly residue of petroleum refining operations. Ironically, at the very core of this rather twisted perception about bunkering, is the near-zero availability of locally refined petroleum products from Nigerian refineries, for (legal) bunkering.
Bunkering is the main activity within the Port of Gibraltar in the Mediterranean region. Singapore, another world-class bunkering centre in South East Asia, is a non oil-producing nation. Most Nigerians would be shocked (and awed) to know that Gibraltar is one of the largest bunkering ports in Western Europe, and its bunkering companies continue to grow from strength to strength. Over 6,000 vessels are served each year. In 2002 alone, over three (3) million metric tons of bunker fuels were delivered from Gibraltar.
Gibraltar’s many advantages include its location near major shipping routes, low port charges, competitive market, and its tax-free status within the European Union (EU). Furthermore, the government closely monitors the market continuously, so as to ensure competitiveness and transparency. Incidentally, there is also a UK-based International Bunker Industry Association (IBIA), of which Nigeria is a duly registered member. The IBIA offers professional technical advice on bunkering.
However, quite unlike Gibraltar, and Singapore, Nigeria is not a known reliable supply source of either crude oil, or refined petroleum products. Consequently, most foreign vessels that come to Nigeria for the purpose of bunkering do so either as a matter of last resort (How for do? ), or for the sake of partaking in premeditated mischief and crime: so-called “Illegal bunkering”. Most foreign vessels, especially crude oil carriers, take sufficient bunker fuels from elsewhere, in order to ensure hitch-free and hassle-proof services that they know they would most probably not get in Nigeria.
Today, Senegal, Cote D’Ivoire, and South Africa are the main bunkering centres in Africa. Indeed, the Niger Delta region of Nigeria aught be the Number 1 bunkering centre in Africa, given its strategic positioning in the Gulf of Guinea, just like Gibraltar and Singapore are to the Mediterranean and South East Asian regions respectively, and more so, because of the magnitude of onshore and offshore oil and gas exploration, production, processing, supply, and distribution operations in that part of Nigeria.
However, the criminalisation of bunkering operations, the unstable, inadequate, and unreliable domestic refining capacity, and a miasma of simplistically conceived national energy policies, among several other reasons, account for this unique anomaly in Nigeria. Actually, ships prefer not to come to Nigeria and bunker because of the high port charges, related miscellaneous illegalities, called “levies”, and official extortions like mandatory but illegal “military task force approvals”. The Origins Of A Dysfunction: Before 1973, petroleum products pricing was not uniform in Nigeria.
The retail prices of petroleum products were dependent on the point of sale, relative to the only primary distribution depot then, at the Shell-BP Refinery, Alesa Eleme, near Okrika, near Port Harcourt, Rivers State. In October 1973, the military dictatorship of General Yakubu Gowon decreed uniform pricing of refined petroleum products for the Nigerian market. Subsequently, the Petroleum Equalisation Fund (PEF) Decree No. 9 of 1975 was promulgated. To date, it provides for the uniform pricing of all petroleum products throughout Nigeria, irrespective of distance from point of production.
The Board of the Petroleum Equalisation Fund retains all surplus revenue from the sale of petroleum products, reimburses marketers for losses incurred because of uniform pricing, and recovers the difference between the landed cost of imported petroleum products and the regulated price in Nigeria. It is very interesting to note the close similarity in the conceptualisation of both the Petroleum Equalisation Fund (PEF) and the Petroleum Trust Fund (PTF). Nigeria was divided into twenty-six (26) zones, with each zone assigned an applicable price differential that may be claimed from the PEF, depending on delivery distance from point of supply.
Paradoxically, the scope of PEF reimbursements did not, and still do not include claims from the oil producing areas of the country, since the emphasis was/is on distances covered by tanker trucks. Obviously, the terrain of most oil-endowed areas of Nigeria is swampy or/and difficult to service by road. Moreover, they are close to the refining centres at Port Harcourt and Warri. Consequently, petroleum products marketing companies in swamps of the Niger Delta territory were, and still are not eligible for “bridging” claims, one of the sweet dividends of “petroleum equalisation” post-First Nigerian Civil War (1967~1970).
For some 28 years, the predatory military autocracies of Generals Yakubu Gowon, Murtala Mohammed, Olusegun Obasanjo, Mohammadu Buhari, Ibrahim Babangida, and Sani Abacha, reeled out a farrago of seemingly punitive decrees, all centred on the theft of crude oil and/or petroleum products: e. g. the Petroleum Production and Distribution (Anti-sabotage) Decree (1975). Under this decree, it is an offence, punishable by death, or 21 years of imprisonment, to sabotage, disrupt, or even interfere with the smooth distribution of petroleum products in Nigeria. Offenders are to be tried by a Military Tribunal.
The Trade Disputes (Essential Services) Decree (1976) empowered, and still empowers the military Head of State, now (civilian) President, Chief (General) Olusegun Aremu Mathew Okikiolahan Obasanjo (GCFR) to proscribe any trade union (e. g. NUPENG) or association (e. g. PENGASSAN) of an essential service (e. g. the Nigerian petroleum industry) that is involved in acts that either disrupt the smooth running of any essential service, or cause industrial unrest in the Federal Republic of Nigeria. Violators risk up to five (5) solid years of imprisonment. The Special Tribunal (Miscellaneous Offences) Decree No. 0 (1984), the most draconian of all decrees against “Illegal bunkering”, is the brainchild of the presumed loser of the April 19 2003 presidential elections, Alhaji (Major General) Mohammadu Buhari (GCFR), while he was the temporary head of a military junta that subverted the constitution of the Federal Republic of Nigeria, some 20 years ago. Decree No. 20 (1984) prescribes very stiff penalties, including death by firing squad, revocation of licences, and forfeiture of both fixed and moveable assets, for offences committed against the milder provisions of the Petroleum Decree of 1969, promulgated earlier by the military junta of Dr. General) Yakubu Gowon (GCFR). The scope of Decree No. 20 (1984) covers wilful, or malicious obstruction, damage, destruction, tampering, or interference with the free flow of crude oil and/or refined petroleum products. And yet, “illegal bunkering” persists to date! Of Monkeys And The Security Of A Banana Republic: Shell Petroleum Development Company (SPDC), Nigeria’s oldest and largest petroleum exploration and production (E&P) company, claims it lost at least 50,000 barrels per day (bbl/d) in the first four months of 2003.
On some days, it lost more than 100,000 barrels. It has been estimated that lethally armed criminal networks, operating with the tacit support of local and foreign business mafias resident in Nigeria, Niger, Chad, Burkina Faso, Sao Tome, Malabo, Benin Republic, Ghana, Cote D’Ivoire, Liberia, Sierra Leone, Angola, and elsewhere, ably chaperoned, aided, and abetted by powerful (serving and retired) military and political so-called “Godfathers”, illegally siphon off about US$1billion per annum worth of petroleum (crude oil, and refined petroleum products).
In short, between 100,000 and 130,000 barrels a day (bbl/d) of crude oil, with an international market value of about US$3 million, is being stolen from Nigeria daily, with impunity. This is the equivalent of a very large 95,000-metric ton crude oil tanker being hijacked every week, right under the watchful eyes and very sensitive nostrils of the very loyal and patriotic officers and men of the Nigerian Police Force, the Nigerian Customs Services, the Nigerian Army, the Nigerian Air Force, the Nigerian Navy, the State Security Service, and several other law-breaking, law-enforcing agencies of the Federal Government of Nigeria. By the way, the President and Commander-in-Chief of the Federal Republic of Nigeria, a retired soldier, is also the Honourable Minister of Petroleum Resources, while the Vice President, charged with stirring the economy of Nigeria, is a retired Customs Officer! Heaven help us all. God bless Nigeria. ) Meanwhile, Nigeria loses as much as N10. 75 billion every month to criminal syndicates of crude oil and refined petroleum products thieves operating actively in the swamps of the Niger Delta, and offshore, in Nigeria’s territorial waters, according to sources at the Ministry of Defence.
Incidentally, the Federal Government increased its capital investment in the oil and gas industry by over 100%, from US$4. 65 billion in 1998, to US$9. 47 billion in 2002. A significant proportion of the crude oil, and refined petroleum products that are legally or illegally peddled in the ECOWAS sub-region, is ultimately traceable to the Niger Delta region of Nigeria.
Moreover, the onshore crude oil tank farms at Bonny, Brass, Eket, Forcados, and Escravos, and several other virtually unaccountable offshore crude oil storage terminals and natural gas liquids recovery plants on floating platforms, that litter the coastline of the Niger Delta, can easily accommodate VLCCs (Very Large Crude Carriers) for legal or illegal crude oil evacuation, or/and LNG export. Furthermore, Nigeria’s low-sulphur, low viscosity, low-vanadium content, and low-density crude oil is in high demand worldwide.
Paradoxically, the DPR keeps and updates records of all Nigerian oil industry operations, particularly for petroleum reserves, export of crude oil and refined products, licences, and leases. It advises government on policies that impact on the administration, control, and compliance with relevant petroleum laws and regulations. The regulations are issued as guidelines, circulars, and standards to the industry. The DPR also has regional offices across the country, and maintains an office in each of the state-owned refineries and depots.
And yet, “illegal bunkering” persists to date! How To Fetch Water With A Basket: The process of “illegal bunkering” entails loading crude oil (or/and petroleum products) into barges in the labyrinthine creeks of the Niger Delta, directly from oil field production wellheads, or from NNPC jetties at Okrika, Calabar, Effurun, Escravos, Atlas Cove (Lagos), or from a myriad of private jetties dotted along the coastline of Nigeria, or by deliberately puncturing crude oil or petroleum products pipelines.
From the coastal states of Nigeria, specifically in the swamps of the Niger Delta in Delta, Rivers, Cross River, Akwa Ibom, Ondo, and Bayelsa States, large inventories of stolen crude oil or petroleum products are typically trans-shipped into larger ocean-faring marine vessels, waiting patiently on stand-by, either mid-stream, or offshore, for their booty.
In the hinterland of Nigeria, particularly in Abia, Benue, Delta, Enugu, Edo, Kogi, Ondo, Lagos, and Ogun States, large inventories of refined petroleum products (petrol, kerosene and diesel oil) are loaded directly into tanker trucks from the point of deliberate rupture of petroleum products pipelines that traverse the length and breadth of Nigeria, (less the Niger Delta). In the wake of the “Big Boys” with tanker loads of “illegally bunkered” (i. e. tolen) petroleum products, ignorant villagers typically proceed to their tragic death, while scavenging off the remnants the spilled petroleum products. What is not off-loaded along the ECOWAS sub-region is sold internationally through the North West European spot oil market. The “illegally bunkered” crude oil (or petroleum product) is either traded without documentation or with forged documents. Only recently, the Nigerian Navy announced that it arrested 26 people suspected of stealing crude oil and petroleum.
They claimed that they impounded 2 ships, 17 barges and 7 tanker trucks. Diplomats and defence intelligence analysts believe that Chief (General) Olusegun Obasanjo intends to launch a major punitive military expedition into the Niger Delta region, so as to end “illegal bunkering”, as well as dealing with the recurrent, and seemingly intractable ethnic unrest there. Multinational oil companies, concerned about environmental and safety hazards, as well as revenue losses, have been pressing for stiffer security measures. Resource Control By Other Means:
In tandem with the multinational oil companies, the Commander-in-Chief of the Nigerian Armed Forces, and Minister of Petroleum Resources of the Federal Republic of Nigeria, President Obasanjo (GCFR), has deployed troops to the Niger Delta region following persistent (engineered) inter-ethnic hostilities (that defy all the known laws of anthropology), and subsequent large-scale sabotage of oil field equipment, which caused some multinational E&P companies to temporarily shut down more than 30% of their field operations there.
It is interesting to note that, over the past four (4) years, the principal targets of the sporadic episodes of low-intensity terrorism (i. e. abductions; demands for ransom; sabotage to oilfield facilities, and crude oil pipelines, including the cannibalisation of flow stations) in the Niger Delta, have frequently been mainly the multinational oil companies from the USA and the UK: ExxonMobil, TexacoChevron, Halliburton, and Shell. Hardly does one hear about threats or sabotage to French (elf) and Italian (Agip) E&P multinationals operating in the same Niger Delta region of Nigeria.
Unfortunately, military presence in the Niger Delta region has not addressed the dangerously precarious social, economic, and political situation there satisfactorily. Indeed, gunboat governance, crude arm-twisting tactics, group blackmail, and executive intimidation, disguised as “dialogue” with selected (ass-licking) so-called community leaders, has failed to bring about greater security in the Niger Delta region. Meanwhile, the USA and the EU have been fervently urging Chief (General) Obasanjo to exercise self-restraint in his frenzy for a military crackdown in the Niger Delta, so to keep civilian casualties to a minimum.
It will be recalled that in 1999, thousands of Nigerians were ruthlessly killed in an army invasion of Odi in Bayelsa State, Nigeria. Shortly afterwards, the Commander-in-Chief, and Minister of Petroleum Resources of the Federal Republic of Nigeria informed the nation, through speeches that he delivered to his shell-shocked, awed, and flabbergasted victims, at a welcome reception held for him during his state visits in Yenagoa, Bayelsa State, and at Owerri, Imo State, that indeed, the First Nigerian Civil War (1967~1970) was fought because of “control” of petroleum resources, contrary to the conventional wisdom that claims that Dr. General) Yakubu Gowon (GCFR) fought the war so as to “keep Nigeria one”, or that Eze Ndi Igbo (General) Chukwuemeka Odumegwu-Ojukwu (Ikemba Nnewi) fought the war in self defence, in the face of threatened group extinction, via ethnic cleansing. The Niger Delta region has never been the same again since those speeches. Thereafter, the magnitude, and tempo of abductions, sabotage of oil field facilities, and “illegal bunkering” have increased in direct proportion to clamours for “resource control” Chief (General) Olusegun Aremu Mathew Okikiolahan Obasanjo (GCFR; fss) should know. After all, he is a veteran field commander in that war.
He may be saying the bitter truth! In other words, today, in the year 2003, some thirty-three (33) years after he personally received the instruments of official handover of the petroleum resources of the defunct Republics of Biafra and Benin (today’s South East and South-South geopolitical appendages of Nigeria) from Chief (Major General) Philip Effiong, as the Commander-in-Chief of the Nigerian Armed Forces, and Minister of Petroleum Resources of the Federal Republic of Nigeria, President Obasanjo (GCFR), is indeed the Chief Resource Controller of the Federation called Nigeria, including the Niger Delta.
Criminalize & Divert Attention: The technical, economic, commercial, and political environments of the Nigerian oil industry are dynamic. It is therefore clear that the rules and regulations that govern the oil industry in Nigeria should evolve to meet prevailing realities and challenges. Regulations must be sufficiently robust to accommodate changes. There are some obsolete and moribund regulations that affect the Nigerian oil industry as a whole.
Such regulations need to be identified, reviewed and amended (in consultation with key participants in the industry), in line with prevailing economic realities. It is therefore crucial that workable regulations, including the empowerment of an independent regulatory body, manned by organised, well equipped, proficient, and knowledgeable staff, be put in place to supervise the industry effectively. The Department of Petroleum Resources (DPR), as it is currently constituted, is very constrained in its capacity as an effective regulatory body in the Nigerian petroleum industry.
Nigeria is the world’s seventh-largest exporter of crude oil, with a capacity to produce about 2. 5 million bbl/d, and proven recoverable reserves of over 33 billion barrels of crude oil. “Illegal bunkering” is in the same league as cross-border criminal cabals and cartels. The clandestine business of “Illegal bunkering” is getting increasingly out of control, and a getting progressively suave, with operatives deploying their booty to procure lethal arms, and ammunition.
Chief (General) Obasanjo’s dismal failure to end Nigeria’s culture of bad governance, executive brigandage, and institutionalised corruption, is a national tragedy. With an oil sector that provides more than 95% of Nigeria’s export earnings, the Minister of Petroleum Resources (OBJ) is now under extreme pressure to beef up security, as usual, so as to end the drain on the national treasury, via “illegal bunkering”. And yet, “illegal bunkering” persists to date! Kombo Mason Braide (PhD) I welcome your comments (via e-mail: [email protected] om), and encourage this article to be freely reproduced, published, photocopied, scanned, faxed, reprinted, reformatted, broadcast, digitised, uploaded or downloaded, in whatever manner or form, with or without acknowledgement or further permission. References & Sources: Goldman, A. , Peel, M. & White, D. : “How Nigeria’s Oil Thieves Operate”, Financial Times, London; (Friday, 2 June 2003). European Energy Focus: “Calsoft Provide Solution for e-Fuel. com”; (2003). Osigwe, R. : “Nigeria Potentially Main Bunkering Centre in West Coast of Africa”; Global Energy Security Analysis; Alexander’s Gas & Oil
Connections; Volume 7, Issue #11; (18 June 2001). Braide, K. M. : ‘The Impact of Deregulation on the Downstream Sector of the Nigerian Oil Industry’; (August 2001) Federal Military Government Of Nigeria: “Special Tribunal (Miscellaneous Offences) Decree No. 20”; (1984) Federal Military Government Of Nigeria: “Trade Disputes (Essential Services) Decree”; (1976) Federal Military Government Of Nigeria: “Petroleum Equalisation Fund (PEF) Decree No. 9”; (1975) Federal Military Government Of Nigeria: “Petroleum Production & Distribution (Anti-sabotage) Decree”; (1975). July 2003