Gangs of thieves are tapping the pipelines that feed Africa’s biggest liquefied natural gas plant, collecting condensate — a hydrocarbon more desirable locally than crude — in a dangerous pursuit that’s sent Nigeria’s LNG exports plummeting.
Criminal groups have for decades targeted the oil pipelines that criss-cross the country’s Niger Delta region, but a government crackdown on crude theft has driven them to gas conduits where they seek an ultra-light form of oil that’s easy to process at makeshift refineries.
The surge in activity has crippled gas supply to Nigeria LNG Ltd., a joint venture owned by Nigeria, TotalEnergies SE, Shell Plc and Eni SpA.
“It is a very high risk, very dangerous operation, that’s not always successful. But when it’s successful, they make a lot of money,” said Effiong Okon, managing director of ANOH gas plant, a Seplat Energy Plc subsidiary that operates a $700 million gas project in the area. Decades ago, he was part of an engineering group at Shell that rerouted condensate flows to avoid such theft.
NLNG was held up as a model state-backed enterprise when exports of the super-chilled fuel started in 1999, but its footprint has dwindled. Nigeria accounted for 3.5% of the total global LNG supply last year, steadily decreasing from 6% in 2020, according to BNEF.
At the same time, plans are under way to boost condensate output, which doesn’t count against the oil-production quota Nigeria agreed to as a member of the Organization of Petroleum Exporting Countries. Africa’s biggest producer aims to reach a combined output target of 3 million barrels a day — half condensate — Minister of State for Petroleum Heineken Lokpobiri said last month.
The rise of illegal operations adds another obstacle to increasing that production.
Eight-Year LowNLNG exports tumbled in February, according to commodities tracking company ICIS. That month, the plant only received one-fifth of its gas supply, forcing a shutdown of processing units.
While five of its six production units are back up, a disruption of several months of all NLNG exports would have “a significant impact on the global gas markets,” said Anne-Sophie Corbeau, a researcher at Columbia University’s Center on Global Energy Policy.
The vandalism potentially threatens supply for a seventh NLNG unit that’s under construction, along with existing supply contracts and other planned projects to develop the fuel.
“Security issues may put in question future investments in the gas industry in Nigeria, especially if Nigeria wants to expand its LNG exports,” said Corbeau, citing a glut of projects planned globally and additional LNG exports from the US backed by President Donald Trump.
Crude-theft CrackdownFor decades, crude theft has sparked conflict, exacerbated environmental devastation caused by oil companies, stoked corruption and robbed the country of billions of dollars in revenue a year.
In 2022, as Nigeria struggled to meet its OPEC quota, the head of the national oil company estimated that it could be producing as much as 700,000 barrels a day more if not for criminals stealing crude and oil companies holding back for fear of theft.
Since coming into office in May 2023, President Bola Tinubu has increased security at the oil pipelines, sparking a rebound in output — a boost of more than 40% from three years ago — that exceeded Nigeria’s OPEC production pledge in January.
Some of the security measures have been war-like: using drones and fighter jets to drop bombs on illegal refining sites that dot the delta, while on the ground, private security firms managed by former militants — who used to blow up the pipelines and hold workers for ransom — have ensured better protection of the main crude lines.
“Improved security at the oil pipelines is pushing criminals in other directions,” said Salahuddeen Tahir, head of assets and investments management at NNPC Gas & Power Investment, a unit of the national oil company.
While in the past gangs tapped oil pipelines with tools and hacksaws, today’s gas thieves shows signs of more sophisticated engineering skills — in line with the more dangerous nature of the work.
“These pipelines operate at high pressure, and any rupture poses a significant risk of explosion or uncontrolled fire,” said Claudio Steuer, a senior research fellow at the Oxford Institute for Energy Studies and former general manager at Shell Nigeria.
Condensate can sell for as much as Nigeria’s expensive crude grades like Forcados and Bonny Light and is easily refined or fed straight into generators. The fuel is sold on the streets of most southern cities like Port Harcourt and Aba.
Olu Verheijen, Tinubu’s aide on energy, said the government is dealing with the attacks, but declined to give details. NLNG is working with government agencies “to strengthen the security of upstream production and transmission assets,” it said in a statement.
Criminals are willing to face significant danger even though they’re usually accessing small volumes of condensate, said Okon, of Anoh Gas Plant.
Gangs install valves that slow down the pressure on the lines before cutting through pipes to leak out gas so they can collect the condensate at the bottom.
“High risk, high reward,” he said.
By Nduka Orjinmo,
Bloomberg
