Oil theft in Nigeria A murky business

THE standard depiction of oil theft in Nigeria shows a young man, knee-deep in a swamp, with a bucket or wooden canoe full of pilfered thick black sludge. But a besuited banker in Geneva or a slick shipping trader in London might provide an equally apt image. A report by Chatham House, a London think-tank, unravels a complex network that arranges the theft of oil worth billions of dollars a year.

Oil theft may cost Nigeria, Africa’s second-biggest economy after South Africa’s, as much as $8 billion a year, claims the report. It says an average of 100,000 barrels a day (b/d) were stolen in the first quarter of this year. Politicians, security forces, militants, oil-industry staff, oil traders and members of local communities all profit from “bunkering” of oil, so few have an interest in stopping it. When so many are feeding from the trough, it is doubtful if anyone in Nigeria has the political will to stop it.

Profits are laundered abroad in financial hubs, including New York, London, Geneva and Singapore. Money is smuggled in cash via middlemen and deposited in shell companies and tax havens. Bank officials are bribed. Cash is laundered through legitimate businesses. Some of the proceeds—and stolen oil—end up in the Balkans, Brazil, China, Indonesia, Singapore, Thailand, the United States and other parts of west Africa.

At the smallest scale, telltale plumes of smoke rise from illegal refineries in the Niger Delta’s labyrinthine creeks. But larger-scale bunkering involves siphoning oil from pipelines on land or under water and loading it onto small barges, from which it is transferred to bigger ships in the Gulf of Guinea that carry the stuff to international refiners who may be unaware it is stolen—though plainly many know it is. The line between legal and illegal oil supplies is easily blurred in a country so rife with corruption. Transactions in Nigeria’s oil industry are infamous for their murkiness.

The trade in stolen oil helps other transnational criminal networks to spread across the Gulf of Guinea, creating global links between oil thieves, pirates and traffickers in arms and drugs. The damage caused by thieves also often forces oil companies to shut pipelines down. As a result, Nigeria is producing oil at 400,000 b/d below its capacity of 2.5m b/d. On September 23rd Shell had to close its Trans-Niger pipeline, which should carry 150,000 b/d, because of leaks due to theft, less than a week after it had been reopened.

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