Illegal oil refining thriving amid crisis in Nigeria

Illegal oil refining thriving amid crisis in Nigeria

Nigerian expert proposes to legalise clandestine refineries and train staff. Legitimising the illegally run refineries could be the answer to Nigeria’s fuel crisis.

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Background

There has been a hugely significant trade in stolen crude oil for many years in Nigeria, notably in the south of the country. The thieves consider themselves to be business men, often using small hand carved boats to row out into the Niger Delta during the night, where they then illegally access the pipelines of the multinational oil companies found throughout Nigeria and collect what they see as “their” crude oil.

Along the length of the creek there are numerous homemade refineries, where the stolen crude oil is boiled up into petrol and kerosene which is largely sold locally, and diesel which is sold to traders who take it inland via trucks or barges to be sold on. Each homemade refinery is bordered by a pit which fills with bitumen during the process of refining, this is later sold on to local road construction companies.

The work in very dangerous however with very few alternative sources of income available to them, many locals consider the risk of being injured or killed in an inferno caused by the ignition of the gas produced during the refining process, is a risk worth taking.

A representative for Shell recently stated that they can lose up to 60,000 barrels of crude oil a day due to theft, and significantly more when you include the amount additionally lost due to the resulting damaged pipes. Shell alone, estimates this figure to be closer to 150,000 barrels a day across the whole of the Niger Delta.

The Nigerian government believes that as many as 400,000 barrels of oil may be stolen each day across the whole of the country, and that the countries official oil sales have dropped by over 17% as a result of this theft of crude oil.

Prevention

For many years the military has been tasked with stopping the thieves however significant corruption has ensured that this has to date been largely unsuccessful. One illegal “worker” was quoted as saying “We settle with the army people. If they see money in your hand they will take that,” “If not they will take products from you. If we have 10 drums we will give them two,” he said, “It’s very normal.”

Legalising illegal oil refineries

Ironically since the closure of the countries four official refining plants, the only refineries remaining in Nigeria are the small illegal ones. As a result, whilst Nigeria in the fourth largest exporter of crude oil, it is also the world’s largest importer of refined oil products.

Whilst the exact amount of crude oil stolen is difficult to confirm, there is no doubt that it is a significant problem for Nigeria. Over the last few years over 500 illegal refineries have been demolished and their operators arrested, this however has done little to deter them.

The ingenious ways in which the illegal local workers have found to refine oil could however be legalised and adopted formally, allowing Nigeria to once again refine their own crude oil locally, reducing the amount of refined oil products they therefore need to import and in turn relieving the countries fuel crisis.

This action could actually also stop the theft of the crude oil in the first place, by creating jobs for those who currently believe that their only choice it to work in the dangerous illegal oil refining business.

The former President of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) believes that destroying the illegal oil refineries is not the solution and they should in fact try to find a way of working with the operators of these refineries, in turn ensuring that the country is able to produce their own petroleum products. Other experts however argue that even if the operators of the refineries were offered the chance of legitimisation, they would be unlikely to adhere to the rules and regulations due to the significant income already available to them.

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