Nigeria's Criminal Crude-Exec. Summary

8/13/2019 Nigeria's Criminal Crude-Exec. Summary

1/8

Executive Summary and Recommendations

Nigerias Criminal Crude:International Options toCombat the Export ofStolen Oil

Christina Katsouris and Aaron Sayne

September 2013

Read more

www.chathamhouse.org/nigeriaoil


2/8

Nigerian crude oil is being stolen on an industrial scale. Some o what is stolen is exported.

Proceeds are laundered through world financial centres and used to buy assets in and outside

Nigeria. In Nigeria, politicians, military officers, militants, oil industry personnel, oil traders and

communities profit, as do organized criminal groups. Te trade also supports other transnational

organized crime in the Gul o Guinea.

Tis report explores the international dimensions o Nigerian crude oil thef. It also tackles the

thorny question o what the international community could and should do about it.

Background

Nigeria offers a strong enabling environment or the large-scale thef o crude oil. Corruption and

raud are rampant in the countrys oil sector. A dynamic, overcrowded political economy drives

competition or looted resources. Poor governance has encouraged violent opportunism around

oil and opened doors or organized crime. Because Nigeria is the worlds 13th largest oil producer

exports ofen topped two million barrels per day in 2012 high rents are up or grabs.

Te basic story o how Nigerias crude goes missing has been told or years. o steal oil, thieves tap

into pipelines and other inrastructure in the Niger Delta. Tey then pump the oil onto waiting

barges and boats. Some o it is refined locally while larger vessels carry the rest abroad. Tere are

also allegations that oil vanishes rom at least some o the countrys roughly two dozen export

terminals.

Tis narrative, while mostly correct, is oversimplified. Lines between legal and illegal supplies o

Nigerian oil can be blurry. Te governments system or selling its own oil attracts many shadowy

middlemen, creating a conusing, high-risk marketplace. Nigerias oil industry is also one o theworlds least transparent in terms o hydrocarbon flows, sales and associated revenues. Industry-

watchers and policy-makers ofen think they know more about oil thef than they actually do.

Te specifics o who steals oil are elusive, even in Nigeria. A typical large-scale thef network

has acilitators, operations and security people, local and oreign transport, buyers and sellers,

and a range o opportunists. op Nigerian officials cut their teeth in the oil thef business during

military rule. Over time, evidence suraced that corrupt members o the security orces were

actively involved. Te countrys return to democracy in 1999 then gave some civilian officials and

political godathers more access to stolen oil.

Executive Summary

and Recommendations


3/8

www.chathamhouse.org 3

Should foreign governments engage?

At present oil thef is a species o organized crime that is almost totally off the international

communitys radar. Officials outside Nigeria are aware that the problem exists, and occasionally

show some interest at high policy levels. But Nigerias trade and diplomatic partners have taken

no real action, and no stakeholder group inside the country has a record o sustained and serious

engagement with the issue. Te resulting lack o good intelligence means international actors

cannot ully assess whether Nigerian oil thef harms their interests. Governments need to know

more about Nigerian oil thef and their options or engaging beore they pledge major resources

to conront the problem.

Outside governments probably would have to join orces to curb the export o stolen Nigerian oil

significantly. Nigeria could not stop the trade single-handed, and there is limited value in other

countries going it alone. However, an intelligent multi-state campaign could, in theory, close off

markets and financial centres, and raise the costs o stealing.

Some arguments or outside intervention are more compelling than others. Stolen Nigerian

oil and the money rom it pollute markets and inancial institutions overseas, creating

reputational, political and legal hazards. It could also compromise parts o the legitimate oil

business. On the other hand, oil thet has not been a big security risk or Nigeria or West

Arica, although it has helped destabilize the Niger Delta and could do so again. And the

idea that the international community should label stolen Nigerian crude blood oil, as is

done with regard to the trade in blood diamonds or conlict minerals, is not borne out by

act or law.

Some think the scale o the trade is too big not to act, yet it is not entirely clear how much othe oil Nigeria produces is stolen or exported. Without better knowledge o how oil thef works,

governments hoping to help solve the problem could find themselves out o their depth. Poor

programming would be likely to waste taxpayer money, provoke diplomatic tension, misread the

local political environment and legitimize rogue actors.

Assuming a oreign government did decide to act, with whom should its officials engage? Te

Nigerian government tends to crack down on oil thef only when it reaches hard-to-manage

levels. Past administrations relied on ad hoc shows o military orce and political settlements a

path that President Goodluck Jonathan may largely ollow. Oil thef affects the five international

oil companies that produce most o Nigerias crude to different degrees. Some actors question the

sincerity o the companies public stances on thef, especially where it does not cost them much.

No other industry stakeholders rom oil traders and militants to activists and host communities

seem to have the right mix o influence and will or change.

Recommendations

Tis report recommends the ollowing our first steps or building a cross-border campaign

against Nigerian oil thef.

Nigeria and its prospective partners should prioritize the gathering, analysis and sharingo intelligence.

Nigeria should consider taking other steps to build the confidence o partners.


4/8

4 Nigerias Criminal Crude: International Options to Combat the Export of Stolen Oil

Other states should begin cleaning up parts o the trade they know are being conducted

within their borders.

Nigeria should articulate its own multi-point, multi-partner strategy or addressing

oil thef.

Intelligence-gathering priorities

Future intelligence work on Nigerian oil thef should ocus on the ollowing our topics.

Volumes of oil stolen

Estimates o how much oil Nigeria loses to thieves vary widely. Fundamentally different pictures

o the trade emerge depending on which figures one accepts. Te best available data suggest that

an average o 100,000 barrels per day vanished rom acilities on land, in swamps and in shallow

water in the first quarter o 2013. Tis number does not include what may happen at export

points. It also assumes the integrity o some industry data. Factors that conuse the issue includepoor measurement practices; conusion over how much oil is stolen as opposed to being spilled,

and exported as opposed to being refined locally; conflicting claims about the export terminals;

and mixed evidence that thef is spiking. o firm up estimates, investigators should ocus on:

Te number and operational capacities o active export bunkering rings;

Te nature and size o any so-called white collar oil thef;

ransit, anchoring and uelling patterns o ships suspected o stealing oil in Nigerian

waters;

A survey o small to mid-sized tankers regularly anchored offshore the Niger Delta; and

Mapping o the main illegal bunkering hotspots.

Movements of stolen oil

Crude oil can move in complex ways once it leaves Nigerian waters. Buyers load multiple parcels

o crude onto single ships, or transer oil between ships. Others blend different grades o oil and

place large quantities in storage. None o these moves are suspect per se, but thieves can use them

to launder stolen oil into the licit market. Sources interviewed during the research or this report

tentatively pointed to the United States, several West Arican countries, Brazil, China, Singapore,

Tailand, Indonesia and the Balkans as possible destinations. Results rom a 10-year comparison

o Nigerian oil export figures with import data rom 20 countries could partly support these

claims. Going orward, intelligence personnel should seek to understand:

Te possible roles o commodities traders in oil thef;

Te main nationalities involved, particularly at higher levels o the business;

Case studies o suspect refining companies;

Blending and storage practices or Nigerian oil; and

Any links between oil thef and uel oil trading.

Te money trail

Te big Nigerian oil thef networks use oreign banks and other channels to store and launder

their earnings. Tieves have many ways to disguise the unds they move around the world. Tese

include bulk cash smuggling, delayed deposits, heavy use o middlemen, shell companies and tax

havens, bribery o bank officials, cycling cash through legitimate businesses and cash purchaseso luxury goods. Interviewees named various East, West, and Southern Arican countries, Dubai,


5/8


6/8


Maritime security reform

Foreign aid to agencies that police the Gul o Guinea could theoretically help corner oil thieves.

But programmes would need to target true law-enorcement challenges and get buy-in rom the

Nigerian navy and presidency. Aid to multi-stakeholder bodies offers limited value on oil thef,

as does training the navy and giving it new hardware. racking ships by satellite, another much-discussed option, is only as worthwhile as whatever law-enorcement work it supports. Arresting

ships and persons caught moving stolen oil internationally would also ace big, though not

insurmountable, legal hurdles.

Regulate oil sales

Nigeria has broad powers to sell its oil as it wishes. No government should tamper with the

undamentals o world oil markets to treat an isolated sickness like oil thef. At least two relatively

non-intrusive options exist, however.

Supply-chain due diligence initiatives

Tere is good reason to think that at least some refiners could be purchasing stolen crude withoutknowing, as due diligence practices vary with size, capacity, nationality, budget and location. A

multi-stakeholder scheme that orces refiners and shippers to vet the oil they buy rom Nigeria

could help sanitize markets. But such a programme could become costly and mired in red tape i

it were not well designed, or i other measures did not complement it.

Litigation against buyers and sellers of stolen oil

Foreign governments could hit oil thieves with a range o domestic criminal and civil penalties.

Prosecutors might also be able to charge them with piracy, pillage and other violations o the

laws o armed conflict. Nigerians could try dragging oil thieves to oreign courts or violations o

Nigerian law, as some have recently done with the oil companies. Officials would need to ollow

a ew best practices or prosecuting organized criminals i the cases are to generate more than

headlines.

Follow the money

Following the money trail is a key step towards controlling oil thef. Profits drive the business,

and lax law enorcement allows unds to move reely around sub-Saharan Arica and beyond. Te

most promising initiatives here are as ollows.

Money-laundering cases and asset forfeitures

Convicting oil thieves o laundering money and seizing their assets should be a part o almost

any cross-border strategy. Building strong cases would not be easy, and ideally Nigerian anti-corruption police would help other governments trace the money. But Nigerian paralysis should

not excuse other jurisdictions rom acting in cases where they have good financial intelligence.

Bribery prosecutions

Anti-bribery laws could offer outsiders another tool or catching oil thieves. Further analysis

would be needed to see whether oil thef could meet all the requirements o bribery statutes.

Support for transparency initiatives

Donor support or the Extractive Industries ransparency Initiative or other pro-transparency

lobbies cannot do much to address oil thef. Te types o inormation such programmes provide

would not help most outsiders track stolen oil, and civil society might also find engaging too risky.


7/8

www.chathamhouse.org 7

New financial-sector regulations or example, to orce disclosure o beneficial ownership, or

place limits on use o shell companies could have more value.

Tere are no easy fixes or Nigerias crude oil thef problem. But there are options to help reduce

the problem, which could, i managed well, have positive effects or tackling and reducing otherorms o transnational organized crime. It is hoped that this report will inorm more nuanced

views o the problem and act as a spur to some meaningul action.

For further information please contact:

Elizabeth Donnelly, Assistant Head, Arica Programme

Chatham House

[email protected]

www.chathamhouse.org/research/africa


8/8


t

urt

Calabar

International boundary

River

State Capital

Town

PortHarcourt

Uyo

UmuahiaOwerri

Asaba

Benin City

Akure

Calabar

Warri

Yenagoa

AKWA

IBOM

ABIACROSS

RIVERIMODELTA

EDO

ONDO

RIVERS

BAYELSA

Gulf of Guinea

Bight of Benin

Bight of BonnyNiger Delta


RiverTowns

Location for oil

theft operations:

Broad agreement amongmultiple sources

Limited agreement

Mentioned by one ortwo sources

Gulf of Guinea

Bight of Bonny

River Niger

Nun RiverBrassRiver

SantaBarbaraRiver

St NicholasRiver

St Bartholomew RiverSambreiro River

Bonny River

Andoni River

Imo River

CrossRiver

Calabar River

Ramos River

Dodo RiverKulama River

Middleton River

Fishtown RiverSengana River

OrashiRiver

Forcados River

Escravos River

Benin River

Bonny

Onne

Brass

New Calabar River

Warri

States of the Niger Delta

Rivers of the Niger Delta


State boundary

River

Oil field

Pipeline

Terminal

Refinery

Gulf of Guinea

Bight of Benin

Bight of Bonny

Niger Delta

AKWAIBOM

ABIA CROSS

RIVERIMO

EDO

ONDO

DELTA

RIVERSBAYELSA

Oil installations in the Niger Delta

Nigeria's Criminal Crude-Exec. Summary

Documents

Transcript of Nigeria's Criminal Crude-Exec. Summary