A Primer on Nigeria’s Oil Bunkering

Smoke rises as an illegal oil refinary burns after a military chase in a windy creek near river Nun in Nigeria's oil state of Bayelsa December 6, 2012. Despite billions of dollars worth of oil flowing out of Nigeria South East, life for the majority of Niger Delta's inhabitants remains unchanged. Most people live in modest iron-roofed shacks, and rely on farming or fishing, their only interaction with the oil industry being when they step over pipelines in the swamps – or when a spill blights their landscape. (Courtesy Reuters/Akintunde Akinleye)

This is a guest post by Emily Mangan, an intern for the Council on Foreign Relations Energy and Environment Program. She studies environmental policy at Skidmore College.

http://blogs.cfr.org/campbell/2015/08/04/a-primer-on-nigerias-oil-bunkering/ 

After resuming from recess, the Nigerian Senate pledged to increase the country’s oil revenue by reducing oil theft. Doing so would greatly increase Nigeria’s total oil exports and reduce oil spills that cause severe environmental damage in the Niger Delta.

Every day, oil companies in Nigeria lose between 300,000 and 400,000 barrels of oil to illegal theft. Theft accounts for roughly 15 percent of Nigeria’s 2.4 million barrels per day produced. Oil theft, or “bunkering,” occurs throughout the Niger Delta, where pipelines crisscross the region. Oil export revenue accounts for 70 percent of Nigeria’s total government revenue and 95 percent of the country’s export income. A loss of 300,000 barrels a day costs the government roughly $1.7 billion a month. In comparison, only 5,000 to 10,000 barrels are stolen per day in Mexico, which produces a comparable amount of oil. Despite efforts by the Nigerian government to curtail bunkering by increasing security, theft and pipeline vandalism continues.

What is bunkering? 

The term bunkering encompasses all acts involving oil theft, including diversion and smuggling of oil and unauthorized loading of ships. One common process requires tapping into an oil pipeline and transporting the oil elsewhere to be sold internationally or refined locally. In order to access the oil, a small group of welders will puncture a pipeline at night, establishing a tapping point from which the group can operate.

What damage does it cause?

Oil spills and explosions are a regular occurrence in the Niger Delta. Pipeline vandalism from bunkering leaves pipes especially vulnerable to leaks, spills, and major accidents. Royal Dutch Shell PLC claims that 70 percent of all oil spills over the last five years were the result of sabotage to their facilities. In 2011, the United Nations Environment Program found in Ogoniland, located in Rivers State, oil pollution had devastated mangroves, contaminated soil and groundwater, destroyed the fish habitat, and posed a serious threat to public health. The study concludes that it could take up to thirty years to restore Ogoniland. But oil theft in the Niger Delta continues, and restoration is not likely to happen anytime soon. The degradation to the environment has reduced land arable for farming and has devastated fishing communities. Two thirds of the Nigerian population does not have access to clean drinking water and many have reported oil in drinking water sources.

Roughly a quarter of stolen crude oil is sold locally. Illegal artisanal refineries located in the Delta “cook” the crude into separate petroleum products. The end product yields 2 percent petrol, 2 percent kerosene, and 41 percent diesel. The remaining 55 percent of crude goes to waste, most of which is dumped into the nearby water or into a shallow pit.

Why has it persisted? 

Last year, the Nigerian Navy destroyed 260 illegal refineries by burning the site and, in some cases, pouring out the stolen oil into the creeks, exacerbating environmental damage. Despite the military’s efforts, other refineries pop up elsewhere because it is such a lucrative business. Each refining camp costs only about $4,700 to set up and can make $7,800 a month in profit. The cost of construction is typically no more than 7 percent of annual profits.

Until theft is reigned in, the Nigerian economy will suffer the loss of revenue from thousands of barrels of oil every day. Perhaps more importantly and too often overlooked, the Nigerian people will continue to cope with the consequences of their destroyed environment.