Expert Predicts Increase In Oil Bunkering In N’Delta As Oil Price Drop

Oil theft will be more difficult to control because people have a way of buying it cheaper than they do from the main market

BY SAHARA REPORTERSJUN 30, 2020

With observers predicting a new normal of less than $50 for a barrel of oil, an environmental campaigner has told the Nigerian government to expect an increase in oil bunkering if illegal refiners are not integrated into modular refineries soon. 

Environmental activist, Dumnamenem Fineface, feels youths of the delta will increase their oil bunkering activities to feed if the government fails to help them transition to alternate sources of living.

Two multilateral agencies Nigeria belongs to— the International Energy Agency and the International Monetary Fund—are calling for efficient management of oil and gas operations to reduce the emission of methane, a greenhouse gas which causes global warming.

The policies proposed by these agencies in a recent report would lead to oil prices staying lower than the 2019 average of $60 if adopted by governments. The two agencies want global leaders to remove subsidies that aid fossil fuel production, invest more in mobile energy storage units, build modular nuclear reactors, and increase investment in solar, wind and hydroelectric sources of energy.

All these would reduce the revenue earned by oil-dependent economies like Nigeria and make life more difficult for the already impoverished host communities. 

Fineface, in an interview with SaharaReporters, said, “The impact of COVID-19 and the reduction in oil price on youths in the Niger Delta is this: If they are selling a barrel for like N20,000, they will now have to sell two barrels for like N20,000. Since the products are stolen, they will not drag with potential buyers. Oil theft will be more difficult to control because people have a way of buying it cheaper than they do from the main market.”

With demand for petrol expected to drop in developed economies, following the anticipated replacement of automobiles with electric vehicles, analysts believe refining activities will be restricted to countries like Nigeria, where gasoline engine cars will still remain in vogue. 

Fineface said the government should honour its promise to provide modular refineries for Niger Delta youths and harness their abilities to distil crude oil with no formal training.

“The federal government should stick to their promise and subsidise the license for modular refineries for these youths,” he said. “If it were to be other countries, they would have called the youths involved in oil theft and asked them how they can use equipment worth less than N5m to refine when to construct one modular refinery cost between $150m to $250m.”

The promise to integrate illegal refiners into mainstream refining was made by the federal government in 2017 and the act is nowhere to be reduced, except arrests and destruction of refining camps that always spring back up.

However, an energy policy expert, Denyefa Zibima said federal and state governments were paying lip service to help Niger Delta communities survive the new normal of low oil prices.

“At the level of the state, it has always been lip service, playing politics with the fact that they need to diversify, they need to move away from oil revenue and look for something more sustainable in the mid to long term but they understand that sooner or later these revenues will drop. What I hope does not happen is that we shouldn’t implode at a time we are not ready for it,” Zibima said.

With oil companies expected to close more production wells in the mid to long term, he is worried that these firms are not making an effort to decommission these fields according to standard practice and that the Department of Petroleum Resources (DPR) has looked away.

“You just need to go to the Niger-Delta, to see the number of abandoned wells that are yet to be decommissioned,” he said. “I’ve seen a well that was abandoned for 10 years and you could see the oil bubbling at the surface.”

To help countries come out from COVID-19 and be more energy efficient, the IEA wants governments to stop fossil fuel subsidies, and increase renewable energy investments. The agency will be making its proposal to global leaders on July 9, during its clean energy transition summit.