How Nigeria’s stolen oil is sold, laundered abroad – Report

Britain and the United States (US), among other countries, have been identified as critical factors facilitating the booming trade in stolen Nigerian oil.
Stolen Nigerian oil worth billions of dollars is sold every year on international markets and much of the proceeds are laundered in world financial centres like Britain and the United States, according to a new report by the think-tank, Chatham House.
The report by the London-based Chatham House said that an estimated 100,000 barrels per day (bpd) of oil was stolen from pipelines in the Niger Delta in the first quarter of this year, not including the unknown quantities stolen from export terminals.
The theft amounts to about five per cent of Nigeria’s current two million bpd production but has a wider impact because oil companies are often forced to shut down pipelines due to damage caused by thieves.

Nigeria is producing 400,000 bpd below her capacity, mainly due to theft and pipeline closures,which costs Africa’s second biggest economy an estimated $5 billion a year in potential revenue.
The report said that while oil majors like Royal Dutch Shell and Italy’s Eni are often the first to complain about theft, it is unclear how much they are losing from it, a measure of acceptable losses may be keeping them from taking determined preventive action, the report said.
Oil firms do not pay royalties on stolen oil.
“Nigerian crude oil is being stolen on an industrial scale. Proceeds are laundered through world financial centres and used to buy assets in and outside Nigeria,” the 70-page report, entitled Nigeria’s Criminal Crude, said.
The report noted: “Thieves have many ways to disguise funds … including cash smuggling, delayed deposits, use of middlemen, shell companies and tax havens, bribery of bank officials, cycling cash through legitimate businesses and cash purchases of luxury goods.”
The report fingered the US, Britain, Dubai (United Arab Emirates (UAE), Indonesia, India, Singapore and Switzerland as likely money-laundering hotspots.
The US, Brazil, China, Thailand, Indonesia and the Balkans were listed as the most likely destination for stolen oil.
Nigeria’s Oil Minister, Mrs. Diezani Alison-Madueke, it would be recalled, has called for stolen oil to be labelled “blood oil”, arguing the security risk is similar to those in past and present mineral conflict zones such as Angola, Sierra Leone or Congo.

However, the Chatham House report suggested violence associated with the theft is less than supposed, although the armed gangs involved have destablised the oil-producing Niger Delta in the last decade.
Though the report had suggested that the links between oil thieves, pirates and global criminal networks – including arms and drug traffickers – could feed broader insecurity in West Africa.
Described as the first independent, in-depth investigation into the international dimensions of Nigerian oil theft, the report said that the world’s biggest cause for worry is the money laundering which poses reputational risks for the financial centres that facilitate it.
Noting that Nigerian oil theft’s enduring, if misleading, image is of youths in canoes breaking into pipelines, the report said that these gangs are merely one strand in a complex criminal web that includes foreign oil traders, shippers, bankers, refiners, high-level politicians and military officials.
Multiple criminal groups, some as small as a family unit, operate independently, according to the report.
Evidence from dozens of interviews showed that foreign oil majors sometimes seem willing to overlook it. Specific individuals or companies were not named.

“IOCs (international oil companies) pay no royalties on crude illegally bunkered … Anything stolen from the field is exempt,” it says, adding that the biggest costs are cleaning up after spills and money spent on security.
“For now, theft may not harm IOCs enough to spur a more determined … approach,” the report said.
It noted: “Oil theft is a species of organised crime that is almost totally off the international community’s radar. Nigeria is the main West African hub for other types of organised crime … notably piracy, drug and arms trafficking. The networks involved sometimes overlap with oil theft.”
The report traced the origins of Nigerian oil theft to the labyrinthine creeks and waterways of the Niger Delta, a swampland area spanning over 10,000 square miles that has long been blighted by kidnappings, militant uprisings and gangland violence.
On the smallest scale, gangs hack into exposed pipelines and siphon off oil to be processed in makeshift refineries, according to the report.
It explained that the bulk of the theft is done on a larger scale by networks who can tap into infrastructure buried under ground or water.
These networks, according to the report, break into wellheads and pipelines, install their own pumps and use hoses, some measuring up to 2 kilometres, to load oil onto barges which travel through the delta and transfer the crude onto small tankers at the coast.

The report said that the barges were capable of carrying 3,000-18,500 barrels of oil and the tankers 31,000-62,000 barrels, adding that once there is enough oil in the tankers it is transferred, usually under the cover of darkness, onto an international class ‘mother ship’ waiting further offshore, which can then carry the stolen crude oil to refineries or storage outside Nigeria. The report said that the web of beneficiaries of oil theft makes it difficult to stop and there are doubts whether anyone capable of curbing it really has the will to do so.
“Lines between legal and illegal supplies of Nigerian oil can be blurry. The government’s system for selling its own oil attracts many shadowy middlemen, creating a confusing, high-risk marketplace,” the report said. It runs through possible options for foreign powers interested in curtailing the practice such as genetic oil fingerprinting, sanctions or regulating Nigeria’s sales – but dismisses most of them as likely to do more harm than good.
It says following the money trail – “convicting oil thieves of laundering money and seizing their assets should be part of almost any cross-border strategy” – is a promising avenue.
“A key issue is how much oil companies, traders and shippers would be willing to contribute at the risk of undermining their … capacity to operate in Nigeria,” the report said.