New Telegraph

Oil theft: The feud, the failure, the seizure

While Shell and AITEO are engaged in legal fireworks, the Nigerian National Petroleum Corporation (NNPC) counts losses to crude theft. ADEOLA YUSUF, in this report, examines the state of crude theft and pipeline vandalism in Nigeria


Legal fireworks between Shell Petroleum Development Company of Nigeria Ltd and Aiteo Eastern E & P Company Ltd over allegation of 16 million barrels of crude oil diversion has lead to many revelations.


A Nigerian court sitting over the case, penultimate week, granted an interim mareva injunction directing 20 commercial banks to block the accounts of oil giant, Shell Petroleum Development Company of Nigeria Ltd, in a bid to recover the cash value of the over 16 million barrels of crude oil allegedly diverted from AITEO Eastern E & P Company Ltd. Justice Oluremi Oguntoyinbo of a Federal High Court in Lagos gave the order following an ex- parte motion in suit marked FHC/L/ CS/52/202, which has AITEO Eastern E & P Company Ltd as the plaintiff/applicants and SPDC Ltd as the first defendant.


Royal Dutch Shell Plc, Shell Western Supply and Trading Ltd, Shell International Trading and Shipping Company Ltd and Shell Nigeria Exploration and Production Company Ltd were joined as second, third, fourth and fifth defendants respectively. New Telegraph reports that the banks where Shell companies operate accounts in Nigeria were also joined as respondents in the suit.

Even NNPC is not spared


While the bsttle is on-going, the loss recorded on crude oil theft and vandalism by the Nigerian National Petroleum Corporation (NNPC) hit a whopping $13.384 milllion daily on Wednesday. Group Managing Director of the Corporation, Mallam Mele Kyari, who gave this hint when he led top management team to a meeting with the Chief of Defence Staff, Major General Lucky Irabor, at the Defence Headquarters in Abuja, maintained that the Corporation loses and average of 200,000 barrels daily to activities of crude oil thieves.


He disclosed that though petroleum products theft on System 2B Pipeline has reduced considerably due to support from the security agencies, the nation was still losing about 200,000 barrels of crude oil daily to theft and vandalism. “We have two sets of losses – one coming from our products and the other coming from crude oil. In terms of crude losses, it is still going on.


On the average, we are losing 200,000 barrels of crude evstanding   ery day,” a press release by Group General Manager, Group Public Affairs Division, NNPC, quoted Mallam Kyari to have stated.


The loss in naira and kobo


This came as the benchmark Brent crude traded as at 20:03 WAT on Wednesday at $66.92 per barrel. Using the $66.92 per barrel price of the commodity at the international oil market, the volume lost amount to $13.384 million in one day.


Meawhile, the Chief of Defence Staff, Major General Irabor, has promised to galvanize the military to provide maximum security for the nation’s oil and gas assets. Speaking while receiving the GMD, General Irabor commended Kyari for initiating the engagement, saying: “I am delighted that you made this effort and I tell you that the armed forces of Nigeria will collaborate with you to protect NNPC’s assets.”


Military joins battle against theft


General Irabor, who acknowledged the significant role of the oil and gas sector to the economy, said there was the need for collaboration between NNPC and the armed forces to protect oil and gas facilities, which he described as critical national assets. “It is my intention to cooperate maximally with you and to give necessary instructions to all officers in the armed forces given that our existence, economically, rests almost solely on NNPC, and to that extent, we must do everything possible to give you everything that you require,” the CDS stated. Speaking earlier, the NNPC GMD commended the security agencies for their support and called for more protection for NNPC’s operational assets and personnel.


The legal grounds


AITEO’s motion was filed by Messrs Kemi Pinheiro (SAN) leading Chief Mike Ozekhome (SAN), Dapo Olanipekun (SAN) and four other SANs. In her ruling on the motion, Justice Oguntoyinbo directed the banks to “ringfence any cash, bonds, deposits, all forms of negotiable instruments to the value of $2.7 billion and pay all evstanding credits to Shell companies up to the value into an interest yielding account in the name of the Chief Registrar of the court.” The judge further directed the Chief Registrar to “hold the funds in trust” pending the hearing of the motion and determination of the motion on notice for interlocutory injunction filed before it by AITEO. The court also restrained the defendants or their agents/privies from presenting to the banks “any mandate or instrument for the withdrawal of any money and /or funds standing to the credit of any of the accounts” of the defendants kept/maintained “at any of the named respondent banks, “without first preserving/ ring-fencing the sum of $1,251,305.5 or its equivalent in any other official currency including but not limited to the naira and/or pound sterling being the value of the plaintiff ’s 1,022,029 barrels of crude oil (at the rate of $79.50 per barrel as stated in the Department of Petroleum Resources (DPR) letter dated 8th day of July, 2020.″ The defendants were further restrained in the interim from presenting to the named banks any mandate or instrument for the withdrawal or any money and/or funds standing to the credit of any of the accounts of the five defendants kept or maintained at any of the named respondent banks and or their branches without first preserving.

Shell fires back


Shell Petroleum Development Company (SPDC) has opened up on the bickering between it and AITEO Eastern E&P Company Limited, over crude oil metering disagreement, which has led a federal high court sitting in Lagos, Nigeria’s commercial capital, to block its accounts in 20 commercial banks. The company, insisted in a statement that it believed that “the freezing injunction was obtained by Aiteo without any valid basis.”

The statement issued by Bamidele Odugbesan, Media Relations Manager, SPDC, read: “A federal high court sitting in Lagos granted an interim ex parte order on 25th January 2021 freezing the bank accounts of some named Shell companies in Nigeria. “Some media reports have linked the court order to the allegation of crude diversion against Shell Petroleum Development Company of Nigeria Limited (SPDC).


“It is important to note the claims underpinning the interim freeze order obtained by the plaintiff, Aiteo Eastern E&P Company Limited, relate to the sale of the interests of SPDC and two other SPDC JV partners in the Nembe Creek Trunk Line (NCTL) and OML 29 to Aiteo in 2015; and crude reallocation programme between injectors into the SPDC JV’s Trans Niger Pipeline and injectors into Aiteo’s NCTL, which is a normal industry practice.

“The disputes are subject of on-going litigation and SPDC is working to secure an expeditious discharge of the freezing injunction, which we believe was obtained by Aiteo without any valid basis. “The crude theft/diversion allegation is also factually incorrect.

This is a distinct issue that relates to the directive by the Department of Petroleum Resources to SPDC as operator of the Bonny Oil and Gas Terminal, an asset belonging to the SPDC Joint Venture, to implement a crude re-allocation programme between injectors into the SPDC JV’s Trans Niger Pipeline and injectors into the NCTL.


“Crude allocation review and re-allocation is a normal industry practice to re-allocate previous provisional allocated volumes under the directive and supervision of DPR, and this is not an exercise resulting from crude diversion, underreporting or theft at the terminal. This industry practice is not peculiar to the SPDC-operated Bonny Oil and Gas Terminal alone and does not translate into any loss of volumes to the Federal Government of Nigeria.

“The re-allocation in issue was initiated by SPDC as operator of the Bonny Oil and Gas Terminal, while the DPR validated and confirmed it for implementation for the concerned oil producers. “Crude oil production metering and allocation are subject to specific guidelines issued by the industry regulator, DPR. SPDC strictly adheres to these guidelines and the implementation is regularly verified by the regulator.


“DPR, in response to media enquiries on Saturday 13th February 2021 described the allegations of crude diversion/ theft against SPDC as untrue and urged that the allegations be disregarded.


“SPDC and all Shell companies in Nigeria are responsible Corporate citizens who conduct their operations in accordance with applicable laws and industry best practices.”

Last line


Nigeria is loosing a lot to crude theft and the more government takes efforts to curb the menace, the better.

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