An estimated 150,000 barrels of crude oil are stolen every day in Nigeria. The vast majority of this is sold internationally, but approximately 25% stays in the Niger Delta for refining and consumption. Illegal oil refining in the region comes with steep economic, environmental and social costs. Unless the problem is better understood and key drivers of the illegal economy are analyzed, the trade could come to undermine the stability of Nigeria’s legal oil sector.
The United Nations Environmental Program (UNEP) Environment Assessment of Ogoni land highlighted that in addition to poor pipeline maintenance by international oil companies, illegal oil refining in the Niger Delta is a major cause of environmental degradation. Whole communities have lost their traditional livelihoods as fisherman and farmers, as the effects of illegal refining, compounded by equipment failure, pollutes their water and land.
The refining process also poses serious health risks. The dangers notwithstanding, organized theft of crude oil and the illegal refining business it feeds also support the families, small businesses and social aspirations of many Niger Delta communities. Interviewees for this report described illegal oil refining as an entrepreneurial, free market response to local economic dysfunction, socioeconomic pressures, the Niger Delta’s chronic fuel shortages and government’s failure to deliver basic public services.
The oil companies operating in the delta and the media regularly draw attention to this illicit industry, noting for instance that some illegal oil refining camps brazenly operate in broad daylight. In response, the military Joint Task Force (JTF), charged with patrolling on-shore oil fields, each year destroys thousands of illegal refineries. However, the set up costs are so low and returns so high that within weeks illegal refiners start up new camps. Some claim the problem is worsening, with suspicions that as the 2014/15 election gets closer, oil theft and the associated environmental damage it causes will get even worse. Evidence also suggests that rogue actors within the JTF actively participate in and profit from theft and illegal refining.