The slippery business of crudeoil theft

This July, scandals seem to be climbing on top of each other in the oil industry like people trying to make a human pyramid. The amount of money being made is what is called shut up money. You know … they did this, they didn’t do that sort of talk. But hey, the change is here, and may the innocent be exonerated while the guilty – that have grown fat feeding over our collective commonwealth – quiver under their beds. The fear of EFCC + Buhari they say is the beginning of…
Okay, so things got a little curious on July 15, when we suddenly woke up to hear that Buhari’s government had banned about 113 vessels from engaging in crude oil/gas loading activities in any of the terminals within Nigerian territorial waters until further notice. The affected tankers were also barred from movements within the county’s territorial waters without further ado. Hmm. There is a lot more going on than we can see, right?
Well anonymous shipping and trading sources squealed that government’s grievance with the shipping companies stem from issues surrounding output figures related to crude oil exports at the port of discharge.
The sources who don’t want us to mention their names spoke about a few incidents between Nigerian authorities and their crude oil buyers regarding differences between the volume of crude that was discharged, compared to the volume on the bill of lading.
Anyway, to properly deal with the issues in the oil industry Buhari really needs to cool down a bit and study the way these deals roll, so that no one can accuse him of taking hasty actions when he finally decides to use the whip.
The truth is that every day in this country, oil thievesdrill holes into remote sections of the long pipelines that ship our crude. It’s big business to these people and they deal with international buyers.
Not all those that enter the forests of Nigeria and always seem to swim in money are into money rituals, armed robbery, etc. Some have parts of oil pipelines that they ‘own’ and tap oil from deep in the forests, sucking cool cash from the nation every day. Others arrange for a tanker or two and a good oil pipeline welder and find a portion were JTF people are unlikely to disturb them, and begin their own oil business, with the tanker packed nearby. Some people may be settled to look the other way while all this is going on. The buyer is already nearby; waiting to pay and go with his consignment to whatever country he has come from.
Sometimes those that do the dirty work have powerful government officials backing them up in return for a cut from the proceedings.
The crude is shipped to vessels offshore which co-load the stolen crude oil with legally loaded crude oil and transport all to refineries abroad. Now, Nigerian crude is legally sold FOB (Free on Board) by NNPC so the title of the oil changes from NNPC to the entity lifting the oil once the NNPC’s loading hoses are disconnected from the loaded up ship.
Once that vessel leaves the Nigerian loading terminal, the oil does not belong to Nigeria anymore. It now belongs to the loading entity. Such Liftings are backed by Irrevocable Letters of Credit that ensures all legal fees are paid.
Now if a ship that legally loaded crude at any terminal in Nigeria decides to stop outside your jurisdiction to take on additional crude oil that may have been stolen; how do you stop it from doing so?
The same ship may decide to stop in neighbouring countries to take on additional legal cargo.
During the journey the title of the crude oil consignment may change up to fivetimes (lifting chain it’s called by them traders) before it gets to its final port and so you can appreciate how complicated monitoring these sort of transactions can get. You can’t stop the foreign vessel from buying oil from other people, especially when it is now on the high seas and not on your territorial waters, and yet you know that some monkey business is going on with your country’s oil.
So one can understand why Buhari ordered what may appear to be a blanket ban but, if you do that and leave it at that, you end up punishing both the guilty and the innocent and that’s not fair.
I appreciate Buhari’s angst, given that his government has been deprived of the money it needs to fulfill its campaign promises, but you still cannot throw away the baby with the bathwater as all are presumed innocent until proven guilty. The best thing for now is for Buhari to increase the surveillance capacity of the Nigerian maritime and security agencies by equipping them with high tech surveillance equipment like satellite and drone technology. That way, he can catch the culprits red handed and no one will protest.
Already, the international tanker owners’ body INTERTANKO has raised serious objections to his actions, and though one could then ask what INTERTANKO was doing all this while, they have a point. Collective punishment is not even advisable at this point.
It may even be economically counterproductive because freight rates may skyrocket to unmanageable proportions as a result, especially as the names of more tankers are being added to the prohibited list. And millions of barrels of Nigerian oil for July have not yet found any buyers. This lengthening list if not dispensed with, may force us to look at our unsold oil stock while it looks back at us at the end of the day; and we all know crude oil is no good to anyone until it is either changed to fuel or exchanged for money.



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