As noted in Part I of this series, the downstream theft of hydrocarbons is a huge industry in Nigeria. As global oil prices rose above $100 a barrel in the early 2000s, the theft of oil became ever more lucrative, attracting the attention of numerous stakeholders willing to engage in illicit activities.
Although low-level criminal elements are involved in the business, they only account for a minor percentage of the overall problem. The majority of hydrocarbon theft involves technical sophistication and sophisticated networks comprised of facilitators, local elites, militant groups, and oil company workers – and benefits from the facilitation of public sector officials open to bribery.
Structure of Illicit Hydrocarbon Networks
Naturally, given the secrecy and the illicit nature of this activity, it is challenging to determine the exact structure of the networks participating in the trade. However, it is highly likely that it involves intricate and multifaceted webs of relationships that range from local level criminals to civil servants and political elite, oil companies (both domestic and foreign), and the security forces.
In terms of the local level illicit network hierarchy, Niger Delta youth and community leaders have often been identified as playing a key role, while more senior roles are occupied by oil workers, security officials and politicians.
“Oil theft is a big criminal ring with sophisticated organisation and international network. Where will poor people get the millions to buy or rent vessels, bribe customs and get military cover for their operations? Oil theft is not for the poor” - Premium Times
Lastly, the illicit hydrocarbons trade is highly opportunistic and is open to all parties seeking to turn a profit. Accordingly, individuals looking to further their financial standing can establish a protection racket or offer their services to an existing network. It has been common for corrupt members of the security forces (Navy and JTF) to form ‘unions’ to collect ‘taxes’ from individuals actively participating in oil theft. These dues may be payable on a weekly, monthly or ‘per trip’ basis, and those who refuse to pay the union can have their operations halted.
Local militias and criminal groups are also known to have extorted taxes from illicit hydrocarbons networks in return for abstaining from sabotaging their pipeline taps and vessels.
Militant-Assisted Theft & Illicit Networks
While criminal elements are certainly present in the trade to some degree (i.e. tapping and loading oil), large-scale oil theft and sale requires a network of key players. According to a variety of existing open source reports, and based on Shadow Governance enquiries, these stakeholders include facilitators, operators, logistics and security advisors, domestic and foreign transporters, as well as purchasers and sellers.
In 2002, militant groups operating in the Niger Delta began to infiltrate pipelines to pilfer and sell oil to finance their respective agendas. As the proceeds were largely used to finance armed rebellions against the Federal Government and multinational corporations operating in the region, the illicit hydrocarbon trade shot to regional and international prominence.
According to a 2008 BBC interview with a source close to the former government of President Olusegun Obasanjo (1999-2007), illicit groups conducting oil theft operations on the ground in Delta State are merely the tip of the iceberg. Several of these groups were under the control of the nation’s top political ‘godfathers’, who were able to exert considerable influence over the executive and security forces. Accordingly, there has arguably been a lack of political will to address the issue over fears that investigating the shadowy elite could result in a coup d'état or civil war.
Given the extent of alleged elite involvement in the illicit hydrocarbons trade, these individuals have sought to leverage the presence of regional instability and hide behind the conflicts between local militants and the state.
Due to sustained high unemployment levels in the region, it has been easy to recruit local gangs to provide protection to illicit cargos and prevent it from being stolen by rivals. These groups have also formed protection rackets and have been employed to sabotage pipelines to allow taps to be placed more easily while the pipelines are shut down and repaired.
Of course, there is complicity within government agencies, coastguard and security forces, and port authorities tasked with combatting the issue. These officials have been known to provide falsified documentation and the logistics required for illicit networks to sell the oil.
Given the nature of illicit oil theft; operations such as large-scale hydrocarbons theft and bunkering in the Niger Delta could not take place without the assistance, collusion and/or complicity of regional security forces. Accordingly, collusion between illicit actors and members of the country’s military – particularly the Navy, Joint Task Force (JTF) and coastguard – has effectively nullified attempts to stem the proliferation of illicit activities.
The extent of security forces complicity was highlighted in November 2004, when three high-ranking Nigerian naval officials were dismissed and charged in relation to their complicity in illegal bunkering and for facilitating the disappearance of impounded vessels to be used in illicit bunkering operations.
However, in several other cases, military personnel arrested on suspicion of having connections to bunkering operations have simply been released without charge – once again attracting allegations of high-level protection.
Local sources have also claimed that members of the military frequently work for militant groups in their downtime, if provided the appropriate financial incentives, and have alleged to have witnessed JTF officers standing guard at illegally placed taps in pipelines and providing armed escorts to vessels carrying illicitly obtained oil.
Conspicuously, the complicity of security forces officials has been evident by the very fact that barges carrying stolen oil have often operated in broad daylight and are “easily observable from the air or ground”. The ostensible failure to identify, apprehend and impound these vessels is a very telling sign of military complicity in the illicit trade (both active and passive). Related: Libya’s Largest Oil Field Shuttered By Protests After Oil Worker Dies
Aside from militant-assisted theft, the misappropriation of hydrocarbons can be conducted by the bunkerers themselves during the process of loading cargos at jetties or terminals. With the complicity of officials from parastatals, IOCs and ships’ captains, oil can be stolen when a ship is moored and lifting oil from port-side bunkering facilities.
In some instances, secret compartments are constructed in ships to hold an unreported portion of the cargo, while in other cases, oil theft simply involves filling the ship with stolen product using fake documents obtained from a ‘friendly’ customs agent.
Additionally, hydrocarbons can also be misappropriated through the loading of stolen product into unauthorised vessels or ships. The resale of the oil is then facilitated by the provision of forged bills of lading from corrupt officials. These forms of bunkering naturally involve the complicity of oil company employees – as well as key government officials who issue the oil lifting contracts.
Furthermore, although the tapping of oil pipelines or wellheads is the most frequently utilised method of hydrocarbon theft, the complexity of the process suggests the complicity of company insiders or former employees who can provide detailed technical advice, as well as critical information on security patrols and inspection schedules.
It is also alleged that oil workers with positions in pipeline control rooms are paid to lower the pressure in pipelines so that they will not explode when taps are placed. According to local sources, in 2016, control room operators were paid approximately $4,500 for reducing pipeline pressure or informing illicit networks when pressure would be reduced for routine maintenance operations.
Furthermore, in terms of piracy, hijacking a tanker is no small feat and requires sophisticated logistics and illicit network connections to facilitate the offload and resale of the stolen hydrocarbons. Conducting an attack on a vessel far from the coast involves considerable planning, a working knowledge of the ‘victim’ ship (and its cargo), and real-time information on the ship’s location or route. Such information is naturally restricted, which would tend to infer the complicity of security forces and shipping industry employees.
Although President Muhammadu Buhari was elected on a strong anti-corruption platform, and vowed to clean up the oil sector, he continues to face a monumental task.
Security operations that have been established to combat oil theft are unlikely to succeed as long as corrupt security elements continue to be involved in illicit activities. Perhaps more importantly, progress will also be impeded by those political and business elites with vested interest in the illicit sector who remain reluctant to confront the issue.
Furthermore, the fact that the theft of oil continues to flourish today, suggests that both political, security and military complicity in the illicit trade (both active and passive) continues, and that corruption and bribery remain part and parcel of the industry.
By Shadow Governance Intel
More Top Reads From Oilprice.com:
- Is Saudi Arabia’s Vision 2030 Too Ambitious?
- America’s Unstoppable LNG Boom
- China's Crude Demand Soars As Maintenance Season Comes To An End