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Ronke Luke

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Nigerian Oil Swindle: How Did 57 Million Barrels Disappear?

Nigeria Rig

Nigeria has filed a law suit against Eni, Chevron, Shell, Total and Petrobras accusing the oil majors of $12.7 billion in illegal oil exports. Per the Associated Press, these companies failed to declare at least 57 million barrels of crude shipments to the United States between 2011 and 2014. Nigeria’s Lower House of Representatives claims that illegal exports of oil and liquefied natural gas (LNG) are higher at $17 billion, and went not only to the U.S. but also to China ($3 billion) and Norway ($840 million). The Nigerian government determined these estimates through audits that showed discrepancies between the declared amounts of oil leaving Nigeria versus landing in the U.S. and other export markets.

Unaccounted oil exports are symptomatic of greater infrastructure problems. Nigeria has no idea how much oil it produces. According to Ecobank’s Head of Energy Research, Dolapo Oni, no data is collected through metering oil either at the wellhead or flowing through pipelines. Instead the amount of oil leaving from export terminals is used as a proxy for national production. The entire system is susceptible to corruption. Oil companies have resisted calls for metering citing costs. Government authorities have not insisted. Industry analysts indicate that an overarching Petroleum Industry Bill (PIB) intended to implement much needed reforms, would introduce metering, close loopholes, and streamline governance. The PIB, however, has languished for eight years in Nigeria’s National Assembly. Including the eight years of consultation that started in 2000 under President Obasanjo, Nigeria has been trying for 16 years to pass legislation to reform its petroleum sector. Four presidents over five presidential terms and five legislative sessions have failed to pass the bill. Nigeria Extractive Industries Transparency Initiative (NEITI) claims that the losses to Nigeria for failing to pass the PIB total $200 billion. Per NEITI, stakeholder disagreements over “regulatory framework, including power of the minister, ownership and control of the resources, host community benefits, environmental concerns, appropriate fiscal regime, etc.” have stifled progress. Related: Is The Era Of Cheap Natural Gas Over?

President Buhari, who has described the corruption in Nigeria’s oil industry as “mind boggling,” is being urged to invest his political capital to rally the stakeholders to pass the PIB. The collapse in oil prices has slashed Nigeria’s foreign exchange earnings and plunged the country into recession. The current economic turmoil might finally present the opportunity to pass the PIB as part of much needed reforms necessary for economic recovery. NEITI is not hopeful, characterizing past and current activity as “motion without movement.”

Recognizing the challenge of navigating the PIB through the legislature, recovering $12 billion through the courts might be easier and serves notice that President Buhari is making good on his promise to tackle corruption in the oil sector.

By Ronke Luke for Oilprice.com

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  • GregSS on October 12 2016 said:
    They don't want to put in meters because of the cost, and 57 million barrels disappear. Sounds like those meters would have paid for themselves many times over.

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