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The Cole plan: Why choke the goose?
By Dele Cole
Published: June 24 2008 03:00 | Last updated: June 24 2008 03:00
It is said in the Nigerian military that you will never find a poor admiral. It is easy to see why. Nigeria loses between $4bn and $18bn worth of oil a year to illegal bunkering, depending on the estimates you use. This theft began at about 20,000 b/d. In 2001, it reached 200,000 b/d and it may now intermittently reach 500,000. On a bad day, 25 per cent of Nigeria's oil exports are illegal. If the trend continues, new exploration will become impossible. Nigeria cannot afford to choke the goose that lays its golden egg.
The Niger Delta crisis started as a legitimate struggle by ethnic Ijaw groups with strong cause for discontent with the oil companies operating in the region as well as with the government. Then, in 1998, came the return of political parties which began to recruit militants to fight for them during elections. They sent these militants for training in other parts of Africa, Latin America and in Nigeria itself. They are experienced commandos trained and armed in many cases at the behest of state government officials.
These groups began the oil bunkering industry. It started small and expanded rapidly. Nowadays, smaller ships ferry back and forth to fill up tankers on high seas. The tankers often come with guns, exchanged as part payment for oil. The oil is then transported to third parties, often to refineries in Central Asia and eastern Europe, which buy at a discount to market price, refine the oil and sell it on the world market. Imagine. This is a global "business" run from mosquito-infested swamps, turning over $20m a day.
The military has been trying to halt the insurrection since 2000 without success. The bigger the incentive (spiralling oil prices) the more remote the possibility the military will win. The more oil sold through the bunkering network, the greater the number of Nigerians with an interest in keeping it going. We know where it is going. We know who is stealing it, and we know the beneficiaries.
So what can we do? Despite the severity of the crisis, there is a solution and it must be implemented with conviction. Remember, the vast majority of people in the Niger Delta have not benefited from oil. They have no power, no water, no services and no jobs.
There are three stages we must go through. First, we have to put in place a tracking system. This is not a new idea. In 2003, Shell proposed the certification of oil exports based on chemical fingerprinting to prevent stolen oil being sold on the open market. Companies operating in Nigeria have the technology to trace oil to individual flow stations. So, if a ship is stopped and contains oil that does not appear to have a legitimate source, a sample can be taken. If there is no record of a sale from the source to the operator of the vessel, then the government could confiscate the oil or require those purchasing it, such as refineries, to verify its provenance. In this way it should be possible to create a paper trail at least as effective as the Kimberley Process, established to curb the trade in conflict diamonds from Africa's war zones. Even if this cannot stop bunkering altogether, it should at least mean that stolen oil is sold at greater discount, thus undercutting profits from the illegal trade.
Second, we need to bring in well-trained and equipped private security operatives to guard the oil from extraction to export. They could be paid a commission based on the amount of oil they save. Some of the militants themselves could be incorporated into this effort, which would need reinforcement from a robust international monitoring body with boots on the ground. The turmoil in the delta contributes greatly to volatility in world oil prices. The world therefore has an interest in seeing it stop.
Third, the government has to demonstrate political will to gain the support of the local population. They built our modern capital Abuja using 1 per cent of the federation account. The cities of Port Harcourt, Warri, Eket, Yenagoa and Asaba should look more like Abuja. Look at how Aberdeen grew from North Sea oil, at how the Gulf cities of Doha, Abu Dhabi and Dubai have developed. Get world-class services and infrastructure. Build airports and hotels. Move the offices of the Nigerian National Petroleum Corporation to the region. Once you change their surroundings, local people will see you are serious and the justification for the insurrection will disappear.
This cannot be done using existing structures. The Niger Delta Development Commission is a small palliative. It is made up of state government appointees and every single managing director and chairman of the NDDC has attempted to become the governor of his state. Organisations for regional development need independence, authority and the expertise to act. It doesn't matter where this comes from. You could put a Welshman or a Dutchman in charge of operations.
How to pay for it? If we recover only 25 per cent of the oil that is bunkered and allocate a portion of that for development of the region we will already have billions. Provided the system is transparent, there will be gains not just for the delta but for all 36 states whose budgets are diminished by this theft. We will need to identify accurately the countries buying stolen oil and secure co-operation from their governments. We will need to prosecute those people buying the oil. The tracking system gives us the evidence trail. We will need support from the international community to do this. But it can be done. There is enough money to transform the Niger Delta. It would be criminal of us not to try.
Dele Cole is a businessman and politician from Rivers State. He was a founding member of the ruling PDP party and a special adviser to President Olusegun Obasanjo between 1999 and 2001.