Would artisanal refiners accept NUPRC’s invite to legitimate business?



Sopuruchi Onwuka

The threats and admonition by power packed government inspection team that visited scenes of pipeline vandalism and destroyed illegal artisanal refining facilities in the Niger Delta signal a fresh start in the vain repetition of treating symptoms instead of the underlying disease.

The destruction of illegal refineries and chasing of the operators and sponsors have proved ineffective at resolving the menace of crude oil stealing to feed sprawling artisanal refining industry in the creeks of Niger Delta. Since early 2004, the multinational oil firms that play in the Niger Delta have exhausted options at curtailing oil theft and its unsavoury impact on businesses.


The business of stealing crude oil and condensate from production facilities has across year become sophisticated, complex and complicated; employing huge capital assets like the infamous MT Africa Pride that suddenly disappeared from the custody of the government.

While illegal export of stolen oil resides above the realms of banal understanding, the distillation of crude oil and condensate at illegal artisanal refining sites in the Niger Delta are very palpable. Stolen oil forms the basis for artisanal refining activities; and both illegal activities deliver devastating impact on the economy, environment and health of Nigerians. It is also most probable that a potent strategy already canvassed by the industry could and will solve the issues around illegal refining.

Close to what has been severally canvassed is the recent call by the federal government on illegal petroleum refiners in the creeks of Niger Delta to obtain licenses that would legitimise and bring their operations under regulatory oversight.

Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Engr Gbenga Komolafe, declared in Port Harcourt that there exists clear regulatory procedure that would legitimise the activities of thieving illegal refiners that currently hack into upstream production facilities and also pollute the environment.

Commission Chief Executive Officer, NUPRC, Eng Gbenga Komolafe

A statement from the Group General Manager in charge of Group Public Affairs Department of the Nigerian National Petroleum company (NNPC) Limited, Mr Garba Deen Mohammed, quotes Engr Komolafe as speaking during a joint inspection visit by key officials of the Petroleum and Defence Ministries to a pipeline vandalism site in Rivers State.

According to Mr Garba Deen Mohammed, the top government officials led by the Minister, Chief Timipre Sylva, and the Chief of Defence Staff, General Lucky Irabor, were in Niger Delta to assess the impact of vandals on national petroleum production infrastructure in the region. Others in the team include the Group Managing Director of the NNPC Limited, Mallam Mele Kyari.

Members of the team chorused government’s anger against vandals that afflict the upstream petroleum industry and pollute the environment.

At Ibaa community in Emeoha council area of Rivers State where military task force destroyed some illegal refineries, Chief Sylva decried the activities of the unlicensed refiners as causing huge revenue losses to the country, destroying the livelihood of the local people and also affecting the environment.

Chief Sylva called for integrated stakeholder action in tackling the menace of illegal refineries that thrive on stealing crude feedstock from vandalized pipelines.

Mallam Kyari stated in his remarks that the vandalism situation in the Niger Delta has become very disturbing and requires coordinated action by different agencies of the government in cutting production losses in the industry.

Mallam Kyari also called on operating companies in the upstream sector of the petroleum industry to adopt appropriate technologies in containing third party access to operated facilities.  

In his speech at the occasion, General Irabor declared that the military would change its strategies in containing the activities of the illegal refiners, saying that the new approach would go beyond the illegal operators to hunt down their sponsors.

The Oracle Today reports that crude oil stealing which first come to light during the military administration of the Late General Sani Abacha has remained a national menace, escalating in spread and stolen volumes that have attracted international illegal export market.

It is estimated that Nigeria ranks tops in volume of petroleum liquids that reach the international oil markets through illegal transactions. And government’s efforts at fighting the leakages by eliminating the dark market routes led to proliferation of artisanal modular distillation of stolen crude across the Niger Delta creeks.

Investigations by The Oracle Today showed that zero cost of feedstock and rising price of distillate products conferred strong lucre on illegal artisanal refining in the country. However, greater part of the crude commodity value is lost since the artisanal refining equipment lack critical components for producing wider range of products including petro and cooking gas.

Experts lament that illegal artisanal refining as operated by the thieving syndicates derive very little value from the volumes of crude oil feedstock and pump out large volumes of effluents that contribute to deep pollution of the environment.

It was also discovered that despite the illegality, adverse environmental impacts, losses to upstream producer and value waste associated with their operations, the artisanal refiners filled huge supply gaps in the local diesel market where they sell their low quality products.

Marketing sources said the clamp down on illegal refineries in the Niger Delta partly contributed to the prevailing scarcity and consequent jumps in the price of diesel in the country.

However, the activity of the illegal refiners have proved devastating on the operations of exploration and production companies in the land, swamp and shallow water locations in the Niger Delta, forcing international oil firms to embark on a wave of divestments from the locations into deeper offshore.

Worse still, the illegal refining activities have no environmental safety measures, resulting in scorching the wetlands, blighting of the rain forest vegetation and coating the rivers of the delta with oil sheen. Thus, from hacking live pipelines to steal crude feedstock through inefficient distillation process to effluent discharge, the impacts of illegal artisanal refining ripples through fishing and farming occupation of the local people.

The proliferation of crude oil cooking in the delta creeks is also proved to be responsible for high concentration of carbon sooth in the aerial space of south-eastern Nigeria, with attendant cases of rampant respiratory disease at the hospitals.

At the 2021 Nigerian Content Summit hosted by the Nigerian Content Development and Monitoring Board (NCDMB) in Yenegoa, Governor Diri Duoye of Bayelsa State had decried the high air pollution in the Niger Delta as a result of gas flaring at oil production sites in the region. He also tasked the industry to evolve technological solution to the hazard.

Explanation came from the Group General Manager in charge of the National Petroleum Investment Management Services (NAPIMS) of NNPC Limited, Mr Bala Wunti, who said that industry intervention in controlling sooth in the air was difficult because, he explained, the culprits are illegal refiners whose activities are not controlled by regulation.

Chairman of Oildata Group, Engr. Emeka Ene, had in a paper he presented at a conference in Lagos advised to the government to harness the illegal refineries in the Niger Delta for modernization and upgrade.

Engr Emeka Ene is former Chairman of Petroleum Technology Association of Nigeria (PETAN); he was also the President of the Nigerian Council of the Society of Petroleum Engineers (SPE); He is the only African currently on the Board of the International Gas Union (IGU). He also sits in the board of the World Free Trade Zone Association.

Oildata and its business arms including Xenergi play in the oilfield services and midstream petroleum processing technology.

Me Ene had suggested upgrading the artisanal refining to modular refining industry in order to achieve the multiple economic goals of addressing unemployment in the operating environment, halting devastation and healing the environment, cutting production losses and preserving industry infrastructure, deriving greater value from crude that is currently wasted, displacing significant volumes of imported products, and reducing associated pressure on the nation’s foreign exchange reserves.

The government has in 2014 initiated a modular refinery scheme and called for requests from all players to obtain licenses from the regulator. And out of the number of licensees, only Niger Delta Petroleum Resources (NDPR), WalterSmith Petroeman and a few other marginal field operators with guarantee of feedstock stepped up to the challenge.  

The capital outlay for modern modular refinery runs millions of dollars, and it is doubtful that artisanal refiners some of whom have been paraded by security agencies in bad physical conditions would be able to muster funds even for licenses.

It took the equity investment from the NCDMB for WalterSmith to realize its initial 5000 barrels per day modular refinery at operated Ibigwe marginal field in Imo State. And like the artisanal refineries in the Niger Delta creeks, the outputs from the successful modular refineries in the country are majorly middle distillates like diesel and fuel oils. Perhaps the key difference is that value is preserved by the regulated modular refiners who would recycle and blend by products into export crude oil.

With about 15 months for the administration of the government to transit, and re-launch of efforts to tackle vandalism in the Niger Delta, a more practical strategy for realizing the goals of the modular refining programme should form part of the agenda for the next administration of the government.

Repeated efforts and costly military campaigns in the past have failed at suppressing the artisanal refining industry. If any signal emerged from the efforts of the past, it has proven the resilience of the illegal refineries which have over the years developed strong supply channels that deliver significant returns from the domestic market.

Engr Komolafe pointed out during the visit with the minister that the artisanal refineries as currently prevail are directly linked with crude oil theft, pipeline vandalism and environmental devastation. He described these associated acts as criminal and disastrous.

“For those who want to do legitimate business,” he proffered, “there are clear government regulations on how that is done.”

Every evidence suggests that there are more prospects of success in sanitizing rather than engaging in the cycle of destroying the artisanal refining industry in the Niger Delta. What has become urgent is a workable programme that would harness the collective energy in the artisanal refining industry for upskilling, empowerment, upscaling, and regulation.

It is in the foreground of this need that the call by Engr Gbenga Komolafe for players in that space to approach to commission for licensing provides a convincing pathway to enduring solutions. The NCDMB has provided a business model that achieved similar objectives with modular midstream processing projects.