Nigeria has been advised to amend the Petroleum Industry Act to include provisions such as the criminalization of crude oil theft and pipeline vandalism with severe punishments as ways to reduce the humongous revenue the country loses annually to the illegal refineries.
The recommendations were made in a recently published research work in MDPI, publisher of peer-reviewed articles based in Basel, Switzerland by energy and legal experts at the Afe Babalola University in Ekiti State, South West Nigeria.
According to the experts who are Olusola Joshua Olujobi, Elizabeta Smaranda Olarinde, and Tunde Ebenezer Yebisi of the Department of Public and International Law of the university, the continuous activities of illegal refiners not only constitute a drain on the nation’s coffers, they cause devastation to the environment.
“Since illegal refining activities in the oil-bearing areas are challenging and represent a threat to Nigeria’s economy and ecosystem, there is an urgent need for robust legal reform to guarantee energy security and sustainability,” the authors said.
The Nigerian Observer revisited this research work following the reoccurrence of another explosion at an illegal refinery in Rivers State, which resulted in the death of over 25 Nigerians last Sunday. Available reports indicated the explosion occurred in Omoku, which is situated in Ogba/Egebema/Ndoni Local Government Area of Rivers State.
Nigeria has recorded a number of explosions at illegal refineries and through pipeline vandalism in the last two years, that left many families and communities in pains and anguish. In August this year, the Nigerian Army reported that it destroyed an illegal refinery in Warri South Local Government Area of Delta State. According to the army spokesperson, Brigadier-General Onyema Nwachukwu, the operation led to the discovery of fourteen storage reservoirs containing about 200,000 litres of crude oil, and another 90,000 litres of Automotive Gas Oil popularly known as diesel.
Based on the Nigerian Observer’s estimation on publicly available data, a barrel contains 159 litres of crude oil. This implied that a reservoir containing 200,000 litres had nothing less than 1,527 barrels of crude oil.
At an average price of $75 per barrel, the destruction of the said reservoir cost the three tiers of government in Nigeria about $94,339.62 or N84.91 million. Nigeria also lost N90 million from the destruction of diesel during the same operation, resulting in a total revenue loss of N175 million.
The Nigerian Air Force also reported that between August and September 2023, it destroyed 30 illegal refineries at Degema in Rivers State.
Earlier, the Nigerian Navy had reported that from May to September 2022, a total of 347 illegal refineries in the Niger Delta Region were destroyed by the nation’s navy. In Nigerian Observer’s computation, with an average of 10,000 litres per an illegal refinery, at least, 3.47 million litres of crude oil would have been destroyed during those operations meant to curb the activities of illegal refiners, implying 21,824 barrels of crude would have been destroyed in the process.
The Nigerian Observer estimated that at an average price of $70 per barrel, a total of N687.46 million would have been lost in the process.
“The absence of a specific and comprehensive provision on illicit oil refineries in the Petroleum Industry Act (PIA), criminalising crude oil theft with stricter penalties for pipeline vandalisation in Nigeria, is a fundamental flaw.
“Sections 183, 202, and 204 of the Act only provide for the detailed permits to be acquired to work in the industry for instance crude oil processing, wholesale storage, haulage conduit, haulage system processes, extensive fuel supply, fossil fuel merchandise allotment and set-up of resources for the manufacturing of petrochemicals.
“However, no rigorous and comprehensive sanctions exist for non-compliance with law; the penalties should be reviewed in conformity with the current global economic reality, considering the adverse effects of the menace on Nigeria’s economy,” the authors said.
In November 2023, the Nigeria Extractive Industries Transparency Initiative (NEITI) said that the country lost N16.25 trillion to a combination of crude oil theft, pipeline vandalism and some other underhand tactics by players in the oil and gas sector.
NEITI disclosed that from its industry reports, Nigeria has lost 619.7 million barrels of crude oil valued at $46.16 billion or N16.25 trillion in twelve years from (2009 to 2020). The losses were from theft and sabotage, based on information and data provided by an average of eight companies covered by NEITI process over the years.
