The Socio-Economic Implications of Oil Theft and Artisanal Refining in the Niger Delta Region of Nigeria

Frustrated by perceived lack of benefits from oil production, communities have targeted the operations of energy companies, demanding better public services and a greater share of government revenues. The unrest has turned into worrying criminal movements, which feeds on massive thefts of crude oil known as Illegal oil bunkering. It is estimated that between 200, 000 and 300, 000 barrels of oil is lost daily to theft. The majority of the stolen crude is taken to large ocean-going tankers waiting offshore, which export the oil to refineries outside the country the rest of the stolen oil goes into artisanal refining which is the processing of the stolen crude in makeshift individual facilities into low quality petroleum products. The economic impact of artisanal refining on the oil industry is said to be variable. Some oil industry participants at a round table discussion on oil theft in the Niger Delta (UK Niger Delta Working Group, 2013) argued that artisanal refining had a very limited economic impact on their operations. They primarily emphasized the negative environmental impact, health and safety issues and downplayed the economic. The argument of this paper is that there is significant economic cost of both artisanal refining and highly organized oil theft, the link is that forced pipeline shutdowns created by small-scale tapping created a vicious circle, that facilitate large scale oil theft, because depressurising pipelines to ensure pipeline integrity made it easier for more taps to be inserted, this is reflected in the continued decline of pipeline product and government revenue.