The Political Economy Of Illegal Bunkering In Nigeria By Kòmbò Mason Braide, Ph.D. Port
Harcourt, Nigeria. Sunday,
19 July 2003 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. 20 (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. stolen) 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! Kòmbò Mason
Braide
(PhD) Sunday,
19 July 2003 @ 3:06 pm. I
welcome your comments (via e-mail: kombomasonbraide@msn.com),
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: 1.
Goldman,
A., Peel, M. & White, D.: “How
Nigeria's Oil Thieves Operate”, Financial
Times, London; (Friday, 2 June 2003). 2.
European Energy Focus:
“Calsoft
Provide Solution for e-Fuel.com”; (2003). 3.
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). 4.
Braide,
K.M.: ‘The Impact of Deregulation on the Downstream Sector of the Nigerian
Oil Industry’; (August
2001) 5.
Federal
Military Government Of Nigeria: “Special
Tribunal (Miscellaneous Offences) Decree No. 20”; (1984) 6.
Federal
Military Government Of Nigeria: “Trade
Disputes (Essential Services) Decree”; (1976) 7.
Federal
Military Government Of Nigeria: “Petroleum
Equalisation Fund (PEF) Decree No. 9”; (1975) 8.
Federal
Military Government Of Nigeria: “Petroleum
Production & Distribution (Anti-sabotage) Decree”; (1975).
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