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Illegal taps on oil pipeline wreaking havoc on Nigeria

by John Vidal

The Observer

The flames roared 20 meters above the Niger delta swamp for 48 hours; 6,000 barrels of crude oil spilled into the creeks and waterways around the village of Bodo and several people died.

But although the Nigerian Army and Navy were stationed just 100 meters from the site of the massive explosion, no-one knows — or will say — what really happened to Nigeria’s most important oil pipeline around 2 a.m. on June 19.

It could have been an accident. The Trans Niger pipeline, which transports around 150,000 barrels a day of crude oil from wells across the Niger delta through the creeks and impoverished villages of Ogoniland and Ogu-Bolo to the giant oil terminal at Bonney, is rusting, nearly 50 years old and known to spring leaks. But it is also one of the most sabotaged pipelines in the world with local communities accused by Shell of making over 20 attempts to tap oil from it in the last year.

Company contractors had been repairing one section of the pipeline when the explosion happened but the official investigation team believes that the accident followed a botched attempt to steal tens of thousands of barrels of crude oil. Even as one group of engineers was removing illegal taps on the line, another group is thought to have been installing equipment to allow huge amounts of oil to be siphoned straight into large barges where it would be taken out to sea to waiting tankers bound for Europe and the United States.

“From the moment I got to the scene [the next day] I was suspicious,” says Catholic priest Father Obi, appointed by Shell to be an official observer for the Bodo investigation. “The scene had been hurriedly deserted. Shell must have known what was going on. The military must have known. Everyone knew there was complicity. I am personally sure that Shell knew that its oil was being stolen.

“If the managers did not know, then those who they put in charge [of the operation]seemed to know. This [theft] could not have happened without the collusion of the authorities and the military.” Obi is concerned that the official report has still not been published and is threatening to release his own.

It all adds up to organized crime stealing oil using the cover of the authorities, he says. “Why was a massive barge able to hold 10,000 barrels of oil being loaded at 2 a.m. with crude? Why did another catch fire? Why were excavators there? Why were local observers arrested the next day, their cameras confiscated and memory cards destroyed? Were the thieves being protected by the military? Was the company paying workers to clean up oil spilled in the process of theft they themselves were engaged in? Did Shell know its oil was being stolen from under its nose?” he asks.

In a statement, Shell accepted its oil was being stolen when the accident happened but strongly denied any collusion or knowledge of who might be responsible. Shell Nigeria’s managing director, Mutiu Sunmonu, said: “Unknown persons continued to reconnect illegal bunkering hoses at Bodo West even as our pipeline team were removing crude theft points.” But the company has yet to make public its own investigation.

“We are not aware of any direct involvement [in the Bodo explosion] but we would take legal action if anything was discovered,” adds a spokesman for the company in Port Harcourt.

“One has to understand there is this accusation that the oil industry employees are behind this, but there are thousands of people who have the skills who may have been working with the industry over the years. These people are outside and some of them may be for hire. There is a sophisticated organization, clearly it is not just local. There has to be a wide network,” says Philip Melshelbila, head of Shell communications in Lagos.

The Bodo explosion is significant because it shows how oil theft in Nigeria has reached an industrial scale. It is now undermining Africa’s second-biggest economy and ranks with the drugs trade as the most lucrative crime in the world.

According to President Goodluck Jonathan, 300,000 to 400,000 barrels of oil per day, or more than 10 percent of all Nigeria’s production, are being lost at a cost to the state and oil companies of around £1 billion a month — more than is spent on education and the health of the nation’s 168 million people. Not only is Nigerian oil theft helping to keep the world price of oil high, it is causing corruption and social disorder, says the president.

“The figures are huge. [Oil theft]could destabilize Nigeria. The business is worth billions of dollars a year. It is on an industrial scale, and involves commodity traders, international [criminals] and a whole network of people. There are some allegations that the oil companies themselves are implicated,” says presidential aide Ken Saro-Wiwa, whose father, along with other Ogoni chiefs, was executed in 1995 after a peaceful protest against Shell.

“We are losing 60,000 to 80,000 barrels of oil a day. This is just what we know is stolen from the trunk lines. We have to shut down lines, so, taken together it’s probably 300,000-400,000 barrels a day. We are seeing more illegal connections, more frequent shutdowns than one year ago,” says Melshelbila.

According to a report from the foreign affairs think tank Chatham House, in central London, oil is being stolen not just from pipelines but from tank farms, export terminals, refinery storage tanks, jetties, ports, pipelines, and wellheads. “Officials and private actors disguise theft through manipulation of meters and shipping documents. Proceeds are laundered through world financial centers and used to buy assets in and outside Nigeria, polluting markets and financial institutions overseas, and creating reputational, political and legal hazards,” it says.

Much of the stolen oil is exported to foreign refineries or storage facilities, says the report, including buyers in West Africa, the U.S., Brazil, China, Singapore, Thailand, Indonesia and the Balkans. The proceeds appear to be laundered through banks and other channels in various African countries, Dubai, Indonesia, India, Singapore, the U.S., the United Kingdom and Switzerland.

The scale of the “bunkering” has shocked observers. Thirty-cm pipelines able to transport thousands of barrels of oil a day have been found leading straight from pipelines into the swamps. The Nigerian Navy had to sack two admirals for their role in the disappearance of a tanker which had been seized for transporting 11,000 tons of stolen crude.

“A lot of big-time stealing goes on. You know the oil you are offered is stolen,” says one oil trader in Port Harcourt who asks to remain anonymous. “They give it to you without documents at a cheaper rate. I was offered 50,000 liters today for 55 naira (20 pence) a liter. But 75 nairais the cheapest you can get it from the government. You know it’s a racket. There is no chance of getting caught because there is no system to catch people. Big business is big politics.”

He alleges that the Nigerian military has become deeply implicated in oil theft since an amnesty was declared with militants two years ago.

“The military now control the oil platforms, not the militants. People now have to buy oil directly from the military. The military is a chain of command, so I can only assume this goes to the very top. Oil theft used to be about people breaking into pipes. That is not happening any more. If I want to load 200 tons of crude, I would have to pay for a lot of security. It is far easier to go straight to the military.”

Most of the oil is being stolen by the rich, he says. “It is dishonest for government and the oil companies to blame the poor for stealing the oil. The people in the communities are just the foot soldiers. Clearly this is a sophisticated organization. Where do people get vessels, the money for bribes and security? It costs millions. What the poor take is very small. The racket goes deep into the security and political systems. Tens of thousands of tons of oil is being spirited away every week. All the authorities are involved — the oil companies, the military, the politicians. There’s plenty of money to be made so everyone is in it.”

Research by delta nongovernment group Stakeholder Democracy Now (SDN) estimates that 75 percent of the stolen oil is being exported with the rest being refined in illegal “artisanal refineries.” More than 500 of these refineries are known to have been set up in the last five years, taking stolen crude and refining it into a rough diesel for local sale.

According to SDN, a medium-sized illegal refinery costs around £3,000 to set up but can earn that back in a few weeks. But the operators need to pay hefty bribes to the police and military, as well as to buy oil tapped off the 1,600 km of pipelines that cross the delta. Each tapping point, says SDN, can earn more than £500,000 a month but its investors must pay armed guards, the military, contractors, local communities and even oil company staff.

Delta communities freely admit their role in the theft of oil but blame continuing poverty and pollution for their actions. “The government and oil companies are collecting our oil and we don’t have jobs, or money so we have to collect the oil and refine our own,” says a man in the village of Bolo near where an illegal refinery was set up five years ago.

Bolo leaders admit that the military was paid off. “When the refinery was working it used to refine around 10,000 liters of oil a day. It could only operate with the help of the police and military, The pay-off system to the armed forces and police was well organized. It was a plum posting for the military here. Most army have a lifestyle that you cannot explain,” says Mela Oforibika, a lawyer and chief of the Bolo community.

“This place was booming. Every house was rented out. Thirty people had jobs. Young men came in who knew the art of distillation. What moral right did I have to stop them? It brought us money. The bars were full, the economy benefited.”

But the pollution from the illegal refineries was extreme because no one knew how to safely dispose of the waste residues from the diesel-making process. The Bolo refinery on the small island of Odokian was raided by the military five months ago, possibly because the consortium who owned it refused to pay the authorities for protection.

Today the four-acre (1.6 hectare) site stinks of oil and may never recover. It is saturated with waste oil, the palm trees are blackened by fire and there are no fish in the waterways. Rusting pipes, burned-out oil drums and old metal tanks litter several acres of what was lush farmland.

Community chiefs blame the oil companies and government for the pollution rather than the refiners. “There’s a heavy level of unemployment here. People knew what was happening to the environment, but what is the alternative for the young men? The illegal refineries were set up as a direct result of the wickedness of Shell and the oil companies who polluted the waterways and never compensated us. The refineries have been destroyed but they will come back. How long can you keep armies to police these communities? We would never have allowed these [refineries] to come into our area if we had been properly compensated before,” says Boma Ipiurima Asitonka, a Bolo teacher.

“You cannot abandon people like this. If there was work here, no one would have made this pollution,” says Oisiekel Tubomie, chief of Bolo youth council.

The only solution to oil theft is to give people a stake in the oil, say the chiefs. “We propose that the government sets up and licenses legal, mini-refineries in dozens of villages and sells them oil at cost price so they can profit, provide jobs and diesel for the communities. It would destroy the criminality and end the pollution,” says Oforibika.

But this is not an option for the oil companies, who must operate in an increasingly volatile environment bristling with guns. Shell plans to spend £1 billion building a new, more secure loop for the Trans Niger pipeline to bypass Ogoniland and areas where its present one is regularly sabotaged.

“If the government and the oil companies spent a fraction of what they lose to theft on developing the delta communities, they would not have these problems of theft. As it stands, the oil industry is run by a very small elite for a very few people. If nothing changes, the future here is bleak,” says Oforibika.