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High crude prices create an incentive for oil smuggling – Wale Okunrinboye

When prices are high, there is a lot of incentive for people to try and make money from it in the export market as they expect to make more money.

This is according to Wale Okunrinboye, Head of Research at Sigma Pension while speaking on reports of oil theft in Nigeria on the OnTheMoney (OTM) podcast show held on social media app Clubhouse.

  • According to Okunrinboye, when oil prices spiral upwards, it serves as an incentive for smuggling. He said, “If prices are high, there is a lot of on incentive for people to want to steal oil…it just means that there is a lot of incentive for people to try and make a few barrels here and sell it at the export market”.
  • “Unfortunately, the police and security placed around our export terminals still remain our issue and that is where you find that a lot of these losses are coming from”.

He also stressed that between the country and the oil and gas industry, a solution to oil theft needs to be found. He further said the “heart” of the situation is the fact that, “the people where the oil is being mined, do not feel they are included” and this needs to be addressed,

Another analyst, Bolarinwa, commented on the oil theft saying, “essentially, only 10% of what is produced at the wellhead is arriving at the export terminal. The incentive for the parties involved in the theft have essentially become exponential.”

  • He referenced the decline in piracy in the Gulf of Guinea, stating that the country’s security forces are able to reduce and almost eliminate piracy in that part. Hence, our security forces have the capacity to fight oil theft and hopefully, bring the illegal activity to a halt.
  • He reiterated that 90% of the crude oil the country produces is making its way either to illegal refineries or off the shores of the country, which poses a huge problem where the supply of Premium Motor Spirit is steadily threatened as the share of our crude oil production that the NNPC uses in the swap arrangement of 450,000 barrels per day, can hardly be met.
  • Austin Avuru, founding MD/CEO of Seplat Energy, last week, stated that some oil production wells don’t get to see 80% of production making it to the terminals due to oil theft, as he calls for a national emergency in the oil sector.
  • Tony Elumelu, Chairman of UBA Banking Group and Heirs Holdings has stated that the reason Nigeria cannot meet its crude oil production quota and benefit from high oil prices is due to theft.
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