DOWNSTREAM OIL THEFT

Downstream Oil Theft: Global Modalities, Trends, and Remedies
In Nigeria, the distinction between public and private
sectors has been blurred so often, and so thoroughly,
that it could be said to barely exist. Under the
government of Goodluck Jonathan, from 2010 to
2015, corruption reached unprecedented levels; the
prevailing narrative is that Jonathan, who had risen to
the presidency without establishing sturdy credentials
like those of his predecessors, had to line the pockets
of the political class even more deeply to maintain his
authority.
In what one commentator has called “contractocracy,”
the allocation of contracts has become the chief
mechanism for oil fraud at the national level. 69
Contractual arrangements, orchestrated by the
government and nicknamed “safe sex transactions,”
are used as a way to screen companies from the
taint of doing business with local players involved
in corrupt, fraudulent, or illicit practices. In other
words, the company contracts and interacts only with
the government, even though the officials involved
have a secondary arrangement so that the money
passes through the government to a private actor. 70
The relatively limited effort made to legitimize these
transactions betrays the degree to which overt
corruption and fraud are tolerated.
It is important to note that while national officeholders
engage in much of Nigeria’s hydrocarbons fraud, 25
percent of Nigeria’s oil revenues are distributed to
Nigerian states, with oil-producing states getting
over 10 percent more than that. The governors of
the country’s thirty-six states, who are immune from
domestic prosecution, are positioned to siphon
enormous amounts of cash, and corruption is also
endemic at the state level. 71
Finally, any assessment of hydrocarbons crimes in
Nigeria must include corruption and collusion among
law enforcement agencies and the military—especially,
though not exclusively, the Nigerian Navy and the
Joint Task Force in the Niger Delta (JTF). 72 These two
entities in particular are tasked with mitigating the
illegal bunkering industry—in which ships are illegally
supplied with fuel to be sold on the black market—and
other seagoing criminal activity, and both are known to
69 Tom Burgis, “The Looting Machine: Warlords, Oligarchs,
Corporations, Smugglers, and the Theft of Africa’s Wealth” New
York: Public Affairs (2015), 73.
70 Ibid., 190-92.
71 Ibid., 188.
72 Dauda S. Garuba, “Trans-border Economic Crimes, Illegal
Oil Bunkering and Economic Reforms in Nigeria,” Global
Consortium on Security Transformation Policy Brief Series,
No. 15, October 2010, http://integritynigeria.org/wp-content/
uploads/2012/07/Trans-Border_Economic_Crimes_Illegal_Oil_
Bunkering_and_Economic_Reforms_in_Nigeria.pdf, 12.
have, at times, fallen well short in those responsibilities,
to put it mildly. Multiple cases and testimonials have
revealed how naval personnel have coordinated and
collaborated with oil traffickers, and how JTF troops
have run their own extortion rackets in which they
must be “settled,” or bribed, by criminal operators
looking to continue their activities in relative secrecy
and security. 73
Illicit Hydrocarbons Activity
Costs of Illicit Activity
The scale and costs of hydrocarbons crime in
Nigeria are notoriously difficult to quantify, not only
because of their pervasiveness but also because
Nigerian authorities, as well as industry players, lack
consistent and accurate metrics. Estimates of oil and
fuel stolen and of revenues lost vary, often widely,
and must always be taken as provisional. That said,
a 2015 Chatham House report offers some more
reliable figures. The total annual cost of stolen oil
runs anywhere from $3 billion to $8 billion, depending
on estimates and circumstances (the recent drop in
global oil prices, for instance). The Nigerian National
Petroleum Corporation (NNPC), the parastatal charged
with management of the industry, spent $2.3 billion
on pipeline repairs and security from 2010 to 2012.
Those costs are again mounting on account of the
Niger Delta Avengers as discussed below. In the Delta
region, the epicenter of the oil industry, thousands
of lives have been lost to criminal feuds, insurgent
campaigns, and illicit enterprises masquerading as
liberation movements. 74 This particular hazard has
taken on a new urgency since the emergence of the
Niger Delta Avengers in 2016—a development that
threatens to destabilize the entire country.
In addition to the economic losses, the environmental
costs of Nigeria’s hydrocarbons crimes have been well
publicized, and many arise from bunkering and other
criminal activities in the Niger Delta. This dynamic has
evolved over the years. A 2001 study indicated that
sabotage caused only 21 percent of spills in the Delta,
while a later one found that sabotage closely tracked
militancy, peaking in 2010 and causing an average of
44 percent of spills between 2004 and 2011. 75 As much
73 Christina Katsouris and Aaron Sayne, Nigeria’s Criminal Crude:
International Options to Combat the Export of Stolen Oil
(London: Chatham House, 2013), https://www.chathamhouse.
org/sites/files/chathamhouse/public/Research/Africa/0913pr_
nigeriaoil.pdf, 6-7.
74 Ibid., 17.
75 Freedom Chokudi Onuoha, “Oil Resources Management
and Illegal Oil Bunkering in Niger Delta, Nigeria, 1999-2011,”
Unpublished Dissertation, University of Nigeria (2013),
176, available at http://repository.unn.edu.ng:8080/xmlui/
bitstream/handle/123456789/1226/ONUOHA percent2c
percent20FREEDOM percent20CHUKWUDI.pdf?sequence=1.
ATLANTIC COUNCIL
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