Nigeria's Crude Oil Theft – Not Yet Uhuru

Introduction

The 2025 budget was based on a crude oil production of 2.12million barrels per day. However, the daily production for the past 6 months to September has hovered between 1.5 – 1.7 million barrels per day (mbpd). The current production quota from the Organization of Petroleum Exporting Countries (OPEC) is 1.5mbpd, excluding condensate production of about 200,000 barrels. It thus appears that we are just producing within the confines of our OPEC quota. However, this is far from our capability as a major oil producing country.

Nigeria has the capacity and capability to produce at least 2.5 million barrels per day. Unfortunately, due to years of underinvestment in the industry, regulatory uncertainty, vandalism and significant theft of crude oil production, Nigeria has been struggling with meeting its OPEC allocation. Interestingly, this is a country that was notorious for exceeding its OPEC quota in time past.

This article will focus on one of the perennial problems in the Nigerian oil and gas industry – crude oil theft, what is being done to address the problem and the effectiveness of the various initiatives being implemented in this regard. There is no accurate assessment of the volume of crude oil being stolen in the country. However, at a point in time, it was estimated that about 200,000 barrels of crude oil were being stolen daily in Nigeria. However, in July 2025, daily losses were reported by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) as 9,600 barrels. The consensus is that this problem has persisted because the government has refused to call it what it is – organized crime and then implement the relevant solutions to combat it.

Initiatives currently being implemented

Since the enactment of the Petroleum Industry Act (PIA), 2021, there have been sincere attempts to address this issue. The strategy being implemented combines regulatory reforms, enhanced security, technological innovation and engagement with the oil producing communities. I will examine each of these initiatives and assess how effective they have been.

• Regulatory – The NUPRC has established the National Production Monitoring System (NPMS) to track oil and gas production in the country. It has also introduced upstream measurement regulations to ensure that the way and manner of measuring petroleum is standardized across the industry. These two initiatives have significantly helped to reduce metering losses and enhance transparency in the sector.

The NUPRC also requires operators to obtain export permits, vessel clearance and a unique identification number for each of their shipments. This will enable real time tracking of crude oil. There is also the requirement for advance cargo declaration. These initiatives are being integrated with other government systems to ensure seamless monitoring of oil exports across all terminals and export points in the country.

• Enhanced Security Measures – Government and oil operators have hired private security agencies, owned by ex-militants, to secure pipelines and prevent vandalism. The major beneficiary of these security contracts is Tantita Security Services, which is owned by a popular ex-militant. These private security agencies are collaborating with the joint task forces set up to curb crude oil theft. Though these arrangements seem to have worked, the decision to award surveillance contracts to ex-militants appears to have been driven by short-term considerations. The security of such infrastructure should have been in the hands of government security agencies, and not private security contractors. The significant amounts being invested annually to protect petroleum facilities should be spent in enhancing the state of readiness of state security services.

It is, therefore, doubtful whether these gains will be sustainable in the long run. Why would a government sign off the security of infrastructure of its key industry to ex-militants? How can such contracts be terminated without violence and potential loss of life when all the location maps for those pipelines and other related equipment have already been shared with them? Terminating those surveillance contracts will result in significant loss of revenue in future.

• Adoption of Technology – Government has invested heavily in drones, satellite imagery and other technologies to monitor and detect illegal activities. However, the key issue has always been the lack of proactive response on the part of the security agencies to race to the spot and arrest the perpetrators when caught online. Most of the time, the perpetrators would have left before the security agencies arrived.

• Community engagement – The operators have been doing a great job in getting the commitment of the oil producing communities in securing pipelines and related infrastructure. The PIA established the Host Communities Development Trust (HCDT) to provide funds for the infrastructural development of those communities. The PIA specifically provides that host communities will forfeit their entitlement to the contribution, based on 3% of annual operating expenditure of the operators, required from the operators to the extent of the cost to repair any damage to petroleum facilities or disruption to production activities. This provision has helped to manage damage to petroleum facilities.

Conclusion

According to NUPRC, oil theft appears to have fallen by 90% in recent times. However, the jury is not yet out on the sustainability of these initiatives. The major cause of crude oil theft arises from hot and/or cold tapping of pipelines. Therefore, the need for immediate response by the security agencies when illegal activities are detected is paramount. There is also the allegation of collusion between security agencies and oil thieves that needs to be urgently addressed. The government may even consider tagging our oil as was the case with blood diamonds.

Most importantly, effective cooperation between the government and international communities cannot be overemphasized. Government needs to scale down the award of surveillance contracts to ex-militants and get the security agencies to step into this. This is their role, which should not be abdicated to private contractors under any circumstances. Any government that cannot guarantee security of lives and properties does not deserve to be in power. It is only when these changes are effected that we can boldly declare a new dawn in Nigeria when it comes to addressing theft in the Nigerian oil and gas industry.

References.

• NUPRC web site
• KPMG Nigeria's Petroleum Industry Act (PIA) 2021 – A Game Changer