Artisan refinery, oil theft in the light of international refinery in Nigeria. Prepasred and Presented by Ofoegbu Donald Ikenna (csj, abuja)

1. Crude oil theft, illegal/Artisan
Refining in the light of
international oil refinery
Crude oil theft, illegal/Artisan
Refining in the light of
international oil refinery
Presented by
Ofoegbu Donald Ikenna
{Centre for Social Justice}
Presented by
Ofoegbu Donald Ikenna
{Centre for Social Justice}

2. Outline
• Why bother about oil theft?
– Oil history, importance, where we are now
• Oil theft in Nigeria
– The estimated theft
– Who is responsible for the oil theft?
– Who suffer; opportunity loss
• Artisan Refining
– Why artisan refining?
– Sin or Not?
• What could be done?
• Thank You

3. Scope of the work
The presentation is not going to dwell on
definitions, neither will it try to make a cross
sectional comparison with other countries of the
world. The study will not take us on a whole
journey of investigating field operations of the
IOCs, visit the creeks, or presents NNPC
laboratory results on oil/fuel qualities or the
extent laws. What the presentation will try to do
is instigate our audience on the subject matter
without dwelling on a defined scope or
methodology which are boundless if holistic
understanding is to be achieved.

4. Section 16 of the Nigerian Constitution provides that “all”
Nigerian get the gains of equitable distribution of resources;
which should be managed and distributed by the
Governments.
• The petroleum Act (1946) grants ownership right of all on-shore, off-shore &
continental shelf finds to the Federal government including all revenue from
petroleum resources.
• The NNPC Act (1977) created the NNPC to better manage the affairs of the Federal
government in the oil sector.
• Land Use Act (1979) through the act, the Federal government owns, controls and
manages all natural mineral resources with Nigeria’s geographical area.
• The Mineral & Mining Act (2007) the act operates in accordance with the Land Use
Act 1979.
• The PIB (????), the bill seeks to regulate all the activities of the oil and gas industry. If
passed to law it is expected to improve transparency & competitiveness, address
licences and existing agreements, restructure NNPC, etc
Why bother about oil theft?
Oil history, importance, where we are now.

5. Why bother about oil theft?
GDP
80%
Oil Addiction:
In 1950s-mid 60s, Oil
sector contributed only
15%, compared to 70%
for Agriculture.
Export value of crude oil
was 1% in 1958. Now it
accounts for over 80%
Initial oil production quantity was about 5,100barrels pd, over the years it has increased to a height
of 2.4million b/d at its peak
Of Budget Revenue comes from
oil earning. Implicitly, over 80%
success of the Budget & Nigeria’s
development depends on the
state of Oil Sector
Any form of
deduction to oil
revenue (affecting
Prices or Supply) is
threat to Nigeria

6. 2014 Budget
Close to 60% of the
total Budget is dependent
on Oil revenue
(Revenue is a function of
quantity* and price)
Overtime the Capital expenditure
seats < 24% of the Total Budget,
and has an implementation rate
<45%.

7. According to the NNPC report for 2013,
CRUDE OIL AND GAS PRODUCTION
Total crude oil and condensate production for the year was 800,488,102 barrels giving a
daily average of 2.19 mmb/pd. This is lower than the previous year’s by 6%. In the gas
sector, a total of 2,325.14 Billion Standard Cubic Feet (BSCF) of Natural Gas production was
reported by twenty-five (25) Companies. This shows a decrease of 9.88% when compared
with 2012 production. Of the quantity produced, 1,916.53 BSCF (82%) was utilized, while
409.31 BSCF (18%) was flared.
CRUDE OIL LIFTING
A total of 800,337,206 barrels (2.19 million barrels per day) of crude oil and condensate
was lifted for domestic and export purposes, showing a decrease of 7.65% against year
2012. Of the total quantity, NNPC lifted 341,504,680 barrels (42.67%), averaging 935,629
barrels per day for both domestic utilization and export.
REFINING
The local refineries received a total of 36,193,237 barrels (4,917,613 mt) of (dry) crude oil,
condensate and slops (4.54% of total crude production) and processed 35,233,126 barrels
(4,761,496 mt) into various petroleum products. The total production output by the
refineries was 5,067,501 metric tons of various petroleum products. The combined average
refining capacity utilization for year 2013 was 22% as against 21% in the previous year....
This is still far below average. With 4.54% local refining, it implies that 95.47% are refined
abroad or lost in transit.
Why bother about oil theft?
Importance & where we are now.

8. Pipelines and Products Marketing Company (PPMC) evacuated 4,707,539 mt of petroleum products from
the refineries and it also imported 6,648,757 mt of PMS, HHK and AGO for distribution at no cost
since the discharges were from Offshore Processing Agreement (OPA) and Crude oil for product SWAP
arrangements (was subsidy paid for these 2013 at the same pace?) That is a total of 11,356,296 mt of petroleum
product for domestic consumption close to 60% are refined abroad, making us susceptible to international oil
prices. PPMC sold a total of 12.63 billion litres of various grades of petroleum products through depots and
coastal lifting.
A total of 21,816.29 million litres of petroleum products was distributed nationally giving an average daily
consumption of:
– 43.55 million litres of PMS,
– 7.76 million litres of AGO,
– 7.30 million litres of HHK and
– 1.17 million litres of ATK.
Out of the total volume distributed, NNPC Retail outlets handled 1,645.25 million litres which is about 7.54% of
total volume.
The distribution by zone shows the South-West with the lion share of 38.83% followed by the South-South with
15.43%, North West with 15.04%, North Central with 9.09%, North East with 8.83%, South East with 6.40% and FCT
with 6.39%.
Refineries: Capacity:
Port Harcourt Refinery, Rivers State 60,000bpsd
Port Harcourt Refinery 2,Rivers State 150,000bpsd
Warri Refinery, Delta State 125,000bpsd
Kaduna Refinery, Kaduna State 110,000bpsd
Total capacity = 445,000bsd (barrels per stream day)
Nigeria lacks the capacity to refine most of its crude oil, hence we exports over 98% to other countries and imports

9. Oil theft in Nigeria:Oil theft in Nigeria: The estimated theft, Who is responsible for the oil theft & Who suffers?The estimated theft, Who is responsible for the oil theft & Who suffers?
In 2009, the United Nations said that Nigeria was losing about 150,000barrels per day to illegalIn 2009, the United Nations said that Nigeria was losing about 150,000barrels per day to illegal
bunkering.bunkering.
According to the NNPC 2013 end year report, Pipeline vandalism increased by 58% over the previous yearAccording to the NNPC 2013 end year report, Pipeline vandalism increased by 58% over the previous year
(2012). A total of 3,570 line breaks was reported on NNPC pipelines out of which 3,505 (98.1%) was(2012). A total of 3,570 line breaks was reported on NNPC pipelines out of which 3,505 (98.1%) was
as a result of vandalism, while 65 cases were due to system deterioration resulting in a loss of 327.48as a result of vandalism, while 65 cases were due to system deterioration resulting in a loss of 327.48
thousand mt of petroleum products worth about N38.88billion. Also 2.31 million barrels of Crude oilthousand mt of petroleum products worth about N38.88billion. Also 2.31 million barrels of Crude oil
worth about N38,992 million was lost in the same period. There were 34 cases of fire incidents duringworth about N38,992 million was lost in the same period. There were 34 cases of fire incidents during
the year under review. The report stated that 865,482 barrels of Bonny Light, valued at N 14.598the year under review. The report stated that 865,482 barrels of Bonny Light, valued at N 14.598
billion were stolen in the period under review, while 1.408 million barrels of Escravos Light, valued atbillion were stolen in the period under review, while 1.408 million barrels of Escravos Light, valued at
N23.75 billion were lost to thieves. Also, 25,706 barrels of Urals crude were stolen leading to a loss ofN23.75 billion were lost to thieves. Also, 25,706 barrels of Urals crude were stolen leading to a loss of
N433.58 million, while 12,490 barrels of Ughelli blend valued at N210.67 million were stolen in theN433.58 million, while 12,490 barrels of Ughelli blend valued at N210.67 million were stolen in the
period under review. Giving a breakdown of products losses by region, the report stated that Mosimiperiod under review. Giving a breakdown of products losses by region, the report stated that Mosimi
recorded the highest incidences of loss with 268,760MT valued at N31.364 billion; followed byrecorded the highest incidences of loss with 268,760MT valued at N31.364 billion; followed by
Kaduna with 39,620MT valued at N5.488 billion. Warri recorded petroleum products loss ofKaduna with 39,620MT valued at N5.488 billion. Warri recorded petroleum products loss of
16,860MT, valued at N1.785 billion, while 2,230MT valued at N244.46 million were lost from the Port16,860MT, valued at N1.785 billion, while 2,230MT valued at N244.46 million were lost from the Port
Harcourt area.Harcourt area.
About 30,000 workers have lost their jobs to oil theft in the past two years, the Petroleum and NaturalAbout 30,000 workers have lost their jobs to oil theft in the past two years, the Petroleum and Natural
Gas Senior Staff Association of Nigeria (PENGASSAN), reported. (Aug 3013)Gas Senior Staff Association of Nigeria (PENGASSAN), reported. (Aug 3013)
In 2014, Nigeria is losing about 400,000 barrels of crude oil are lost on a daily basis due to illegalIn 2014, Nigeria is losing about 400,000 barrels of crude oil are lost on a daily basis due to illegal
bunkering, vandalism and production shut-in.bunkering, vandalism and production shut-in.
-Despite these efforts, oil theft in Nigeria is at its highest levels in five years since the government gave amnesty to-Despite these efforts, oil theft in Nigeria is at its highest levels in five years since the government gave amnesty to
former rebels in the area.former rebels in the area.
-It is not clear how much of Nigeria’s oil is stolen and exported. The best available data suggest that an average of-It is not clear how much of Nigeria’s oil is stolen and exported. The best available data suggest that an average of
300,000 - 400,000 b/d vanishing from onshore, swamp and shallow-water areas .300,000 - 400,000 b/d vanishing from onshore, swamp and shallow-water areas .

10. • The former Group Managing Director of the Nigerian
National Petroleum Corporation (NNPC), Andrew Yakubu,
before he was removed had said that “in 2013 alone, the
country lost 300,000 barrels of crude oil per day (bpd).”
• The Nigerian Navy through the Director, Nigerian Navy
Transformation Office, Austen Oyagha, declared in Calabar,
Cross River State, that “the country lost an estimated
average of 55,210 barrels per day or monthly average of
1,656,281 barrels in 2013 (that will be 19,875,372 barrels in
2013). Thus, Nigeria oil losses due to crude oil theft translate
to almost $20 billion yearly in deficit to Nigeria’s economy.
These losses do not only undermine Nigeria’s economy in
terms of foreign exchange deficit, they also pose a threat to
national security for Nigerians.”
Other Testimonies & figures

11. Shell 2013 annual report, - “In 2013, the
number of spills from the company’s
operations caused by sabotage and theft
increased to 157 from 137 in 2012, whilst
production losses due to crude oil theft,
sabotage and related temporary shut- in. On
the average, around 32,000 barrels per day
(bpd) were stolen from SPDC pipelines
(7,680,000 barrels a year) and other facilities,
whilst joint venture lost production of
around 174,000bpd due to shut downs
related to theft and other third party
interference.”

12. The chairman of the federal government
taskforce on crude oil theft, Emmanuel
Uduaghan, governor of Delta State, while
speaking at an African Business Roundtable
workshop on combating emerging threats held
on the sidelines of the recently-concluded
United Nations General Assembly in New York,
said “The persistence of crude oil theft in the
Niger Delta region where over 400,000 barrels
per day are stolen may threaten world peace
and democracy if concerted action is not taken
to curb it.”

13. The Coordinating Minister for the Economy and Minister of Finance, Ngozi Okonjo-Iweala,
appearance at the House of Representatives Joint Committee on Appropriation/Finance in
Abuja also had it on record that, “We are losing revenue; 400,000 barrels of crude oil are
lost on a daily basis due to illegal bunkering, vandalism and production shut-in.”
In the 2013 Budget implementation report, Crude oil sales which accounts for approximately 90% of Nigeria’sIn the 2013 Budget implementation report, Crude oil sales which accounts for approximately 90% of Nigeria’s
revenue, recorded a decline of N1.43trillion or 33.7% from N4.24 trillion in 2012, to N2.81 trillion in 2013. Therevenue, recorded a decline of N1.43trillion or 33.7% from N4.24 trillion in 2012, to N2.81 trillion in 2013. The
drop in crude oil revenue, according to the budget implementation report for 2013 was due to massive theft,drop in crude oil revenue, according to the budget implementation report for 2013 was due to massive theft,
illegal bunkering and pipeline vandalism, which persisted during the period under review.illegal bunkering and pipeline vandalism, which persisted during the period under review.
FGN Share of Oil Revenue as at December 2013
Item Actual Amount (N billions) Budgeted Amount (N’ billion)
Annual Share of Oil Revenue 1,996.23 2,354.74
Quarterly Share of Oil Revenue 499.06 588.69
Share in Four quarters
Actual in Quarter 1 469.40
Actual in Quarter 2 529.17
Actual in Quarter 3 487.58
Actual in Quarter 4 510.08
Actual in All 4 quarters 1,996.23

14. The MTEF thinking
Projections of Oil
Revenue into Fed A/C
Approved 2014
Budget
Proposed 2015
Budget 2016F 2017F
Crude oil Sales 3,840.73 3,716.82 3,830.49 4,042.85
Gas Sales 550.23 515.46 557.81 579.97
Petroleum Profit Tax 1,927.54 2,196.73 2,267.81 2,401.31
Gas Income @30% CITA 96.34 80.82 87.23 90.69
Oil Royalties 703.42 703.3 736.05 753.08
Gas Royalties 40.12 67.34 72.88 75.77
Concessional Rental 0.88 0.88 0.88 0.88
Gas Flared Penalty 2.48 2.48 2.48 2.48
Miscellaneous (Pipe Fees) 3.07 3.07 3.07 3.07
Total Oil and Gas 7,164.81 7,286.90 7,558.70 7,950.10
Take it or leave it:
International oil prices is
likely to fall deeper:
Facts?
Size of US shale oil increasing
massively.
Crises in Ukraine is affecting
the EU demand for crude.
Huge Technological break
though in Renewable Energy use
and the World campaign to cut
down the use of fossil fuel is now
in practice no longer
New and more accessible oil
fields are springing up;
increasing SS against DD.

15. Dr. Bright (DG BOF) - Nigeria’s oil theft
peaks at 300,000bpd” (Public Presentation of the 2014 Budget, Sheraton
Abuja)
Who is/are responsible: Cabal ! Cabal !!
Cabal !!!?
Untouchable
Cabal.
Where are the
sharks?
According to the London-based research group – Chatham House, and Ribadu report, the problem of
crude oil theft is more than pipeline vandalism. Crude oil theft involves a convoluted and complex web
of relationships, spanning all levels of the society – involving diverse relationships. These
relationships are alleged to include highly connected people in and outside government, oil companies
including businessmen, retired and serving military officers, and militants among others.

16. Loosing 400,000bpd at $60 per barrel is a huge loss of $24,000,000 worth of
income a day.
At N200/$, this amounts to N4,800,000,000 (N4.8 Billion) in a 1 day.
In 5 working days = N24,000,000,000 (N24Billion).
In 1 month = N96,000,000,000 (N96Billion)
In 1 year; 12 months = N1,152,000,000,000 (N1.15Trillion)
Who suffers ?:
The Capital Expenditure
Budgeted for the 2014
Budget to provide Roads,
Electricity, Transportation, Bridges,
Educational Facilities, Health Care
Facilities, Military Defence
Equipment Against Terrorism, etc
of
N1.12trillion.
2015 Capital budget = N387.11bn
Oil Theft Nigeria’s Capital Budget
N1.15trillion > N1.12trillion
For Cabal For almost 170 million Nigerians
Section what of the
Nigerian constitution
16?

17. Artisanal Refining: Why artisan refining? Sin or Not?
In the creeks of Ukpokiti, Brass, Escravos, Ogoniland, Akassa and other riverine
communities of the Niger-Delta, artisanal or illegal local refining of crude oil forms
part of the economic ecosystem and is the mainstay of many families. In the past,
fishing and cultivation of crops was the main source of livelihood in the creeks, with
the continual environmental degradation and pollution occasioned by the activities
of the drilling companies as well as oil vandalism, agriculture which was the
mainstay of the people was eroded, leaving the indigenes for the extremes.
Practically an Illegal refining of crude oil, artisanal refining is a booming business in
the riverines. The extreme part of this activity is its stretched pipeline ruptures and
process spill-over that impact on both environmental and human health. Overtime
the government through its military has invaded and destroyed a lot of these “small
scale” artisanal refineries in the creeks. However, disrupting and destroying these
artisanal refineries is rather a scratch on the surface as they soon spring up angrily
and resume production as long as no sustainable source of livelihood is provided for
them.
There exist a positive correlation between oil pipe vandalization and artisan
refinery. At most 20 % of the stolen oil is sold and refined by local artisans whose
local process has a massive environments effects; causing series of respiratory
diseases.

18. Artisanal Refining: Why artisan refining? Sin or Not?

19. • Though artisanal refining may poses as an illegal act, endangering both human
and environmental health, it yet stands as an evidence that the upstream
industry can be decentralised to allow a variety of refining players with varying
sizes and capacity. In my opinion, the total annihilation of artisanal refining does
not necessarily have to be the case, instead a clue can be picked; refined,
standardized and repackaged to augment local refining capacity which is on the
low.
• Considering the poor refining capacity of our national refineries, government’s
lack of interest in reviving existing refineries or set up new ones, not to forget
the huge sum as well as corruption in the bi-imports of refined products, the
governments may as well take up the local ventures by supporting these
artisanal refining business providing proper training through the petroleum
institutes, imposing environmental and health safety standards and encouraging
partnership/ business incentives to allow the purchase of better machines.
• There is need for government to explore the viability of supporting these local
refiners with a view to boosting domestic production and also re- distributing
wealth. Local refining of crude oil provides employment to a lot of youths in the
region (keeping them in their comfort zone). A newspaper piece in daily trust in
2013 reported that in a camp about 400 people earn their living refining what
they call "our natural resource".
What could be done?

20. • Governments should wear their thinking caps and formulate
nigerianised polities that regulates the extractive industries as
a whole. Policies should be put up to open-up the refining
business locally so as to catalyse a shift from dirty-illegal
artisanal refining to clean-legal small scale refineries as
operated in USA, and other developed countries where
households have oil refining machines at home.
• Standardisation is also very vital. There is need for the
establishment of clear safety, environmental and process
guidelines as well as Standard Operating Procedures which
should be monitored by the Department of Petroleum
Resources (DPR) and the Nigerian National Petroleum
Corporation (NNPC).
• Fast and pray that the PIB be signed, sealed and delivered to
the Nigerian people.
• Finally, the government should repent and be brave enough to
fight against oil theft cabals.

21. Thank you

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