The Trouble With Oil Pipelines in Nigeria

On Wednesday in Abuja, the group managing director of the Nigerian National Petroleum Corporation (NNPC) stated that in 2016, pipeline vandalism resulted in roughly 700,000 barrels per day (bpd) being “deferred.” Accordingly, production was 1.3 million bpd rather than the projected 2.2 million bpd, costing the country about $13.3 billion in revenue (at an average price of $52 per barrel). While Nigerian statistics can be problematic, those used by the managing director are likely to be the best available. Oil provides more than 70 percent of the revenue of Nigeria’s government at all levels (this figure has been as high as 90 percent in the past), and more than 90 percent of its foreign exchange. At a time when international oil prices were relatively low and the country was in recession, the fall in oil production due to pipeline vandalism is especially serious.

The “deferred” 700,000 bpd could not be brought to market; much or most of it remained in the ground or in storage facilities. However, some pipelines are breeched in order to steal the oil. Breeched pipelines inevitably result in oil spills, further polluting the environment and damaging the livelihoods of people nearby. Further, Nigerian oil is sweet and light, requiring little refining to produce gasoline, so that illegal mom-and-pop shops can refine the stolen oil into a usable product. Stolen oil is also sold on the international market. There has long been suspicion that political and military personalities have been involved in oil theft. However, the managing director appeared to be discussing pipeline vandalism only, not the larger issue of oil theft. 

Oil theft and pipeline vandalism is an old song in the Niger delta, where there is usually political and social unrest. The NNPC managing director outlined a proposed response to the current situation that includes technical steps (such as burying the pipelines deeper into the ground), stricter law enforcement, but also addressing the political and social drivers of Delta unrest. The latter in particular is a tall order, which no previous government has been able to fill except for relatively short periods of time. Many ‘solutions’ amount to buying off militants that would otherwise steal oil or damage infrastructure. A long term solution to oil theft and pipeline vandalism clearly requires both technological innovation and better law enforcement, but, above all, it must address the deep-seated popular grievances of the region.