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OIL BUNKERING IN NIGERIA’S NIGER DELTA REGION (1990-2007): (THE TRADE, PRACTICE AND ECONOMIC IMPLICATION’S)

Chapter 1 INTRODUCTION 1.1 BACKGROUND INFORMATION This study covered the subject Oil Bunkering in the Niger Delta Region of Nigeria spanning a seventeen year period from 1990 to 2007. The Niger Delta area is host to Nigerian proven oil and Gas reserves estimated at over one trillion barrels or 126 billion cubic. Other baseline information about the Niger Delta has been examined in brief looking at the topography, the people and demography and the land area. The history of Bunker oil and the various types of bunker has been examined. The bunker trade has extensively been exposed as well as the transportation of bunker fuel. The various types of vessels involved have also been understudied. Bunker fuel is technically any type of fuel used aboard ships to fire its engines. In the olden days, ships used coal to fire their engines. Where the coal was stored for use to fire the engines is called a BUNKER. We have moved from coal to thermal fuel oil to fire ship engines but somehow the terminology has not changed. Bunkering is the process of dealing with bunker fuel. According to Oxford English Dictionary – Bunkering is a legitimate process whereby a duly licensed operator provides fuels, water and lubricants (bunkering services) for marine services on request. Therefore bunkering is simply the fueling of ship. It could be likened to establishing a floating fuel service station on the high - 1 - seas or at coastal jetties to supply fuel and provisions including water to ships. Bunkering is an age long activity. Coal was initially used to fire ship engines. Improvement in technology had led to the upgrade of ship engines, hence the hi-tech redesign of ship’s firing power . Today bunker fuel oil remains the most popular firing power for all types of vessels. It is not surprising therefore that the demand and supply of bunker fuel has helped to develop many economies worldwide. Nigeria is a country blessed with the crude oil from where bunker fuel is extracted. Nigeria ought to have a booming bunker oil market from where vessels from other lands would have been visiting to re-fuel but the situation appears not to be case. Today, most bunkering activities in Niger-delta area are illegally done. It is therefore not surprising that at the mention of bunkering everyone thinks of an illegally activity. However there is the need to differentiate between bunkering from oil theft and pipeline vandalization. These are not the same thing although they are closely related. The study has dealt with each case in detail. However, in discussing certain parts of this dissertation it was not possible to separate oil bunkering from oil theft and pipeline vandalization. The available statistics and data did not help matters. Statistics are awash as to amount of money which the nation loses from oil theft, pipeline vandalisation and illegal oil bunkering. According to Akanimo (2004) Nigeria loses $7 Bilion yearly to oil theft while Ikokwu (2007) puts the figure at $14 Billion yearly. Report by Odeyela 2003 alledged that N38bn was lost in six months in 1996. Illegal bunkering leads to the loss of billions of dollars in public funds. These funds could have been used to build schools, hospitals, provide electricity and improvement on other public utilities so that the - 2 - nation develops. But the practice only enriches few individuals who criminally converts what does not belong to them. Bunkering in itself is a legitimate and legal business which can be practiced without problems. Elsewhere in other nations, bunkering thrives and boost their economies. Under the Nigerian constitution, all minerals, oil and gas in Nigeria belongs to the Federal Government. Oil extraction outside the framework of an agreement with the Federal Government is illegal just as is the possession of crude oil by anyone not licensed to do so. Illegal bunkering has today been termed the most profitable private business. The stolen crude are currently been sold at around US $15 to 20 per barrel on the spot market while the actual price market prices is between $100 per barrel (as at the time of this report). It should be noted that the price of crude is presently at an all time high and is increasing daily. There are no capital costs to the illegal bunkerer as the infrastructure belongs to the Nigerian Government and the oil companies. They simply smile to the banks with millions of dollars everyday. It has also been repeatedly alledged that the fight for control of the illegal oil bunkering opportunities in Niger Delta region of Nigeria has been the cause of the escalating violence in that region. The Niger Delta region of Nigeria is situated in the southern part of Nigeria and bordered to the South by the Atlantic Ocean and to the East by Cameroon. It occupies a surface area of about 112,110 square kilometers. There are nine states of the federation in the area called Niger Delta and it accounts for 28 million Nigerians. Conflict in the Niger Delta region arose in the early 1990s due to tensions between the foreign oil corporations and a number of the Niger-Delta’s minority ethnic groups who felt that they were being exploited, particularly the Ogonis as well as the ijaws in late 1990s. Today, competition for control of - 3 - illegal oil bunkering opportunity in the region has fuelled violence between innumerable ethnic groups causing the militarization of nearly the entire region by ethnic militia groups as well as the military and the police. 1.2 STATEMENT OF THE RESEARCH PROBLEM The term bunkering has been thoroughly abused, demonized and misused in Nigerian parlance, so much so that the mere mention of it readily evokes, connotes or triggers subliminal suggestions of grand illegality in the Nigerian paradigm. According to Braide (2005) when petroleum products pipeline get cannibalized, the average Nigerian visualizes illegal bunkering at work or if a shipload of crude oil is stolen from the refinery and sold off as low-pour fuel oil (LPFO) in international market, the average Nigeria assumes that illegal bunkering has taken place. Illegal bunkering has so much captured the Nigerian minds in such a way that one can never assume that there is anything legal about bunkering. It is always thought of as being a mafia business so much shrouded in secrecy that only the initiated can discuss and learn about this. It is often compare to high sea piracy of the dark ages, operating as sea robbers to deny the states of hard earned income. But these are all fallacies. Bunkering business and trade is a big and legitimate business. The fact is that the Nigerian bunker market is not well structured and organized resulting in haphazard access to and dealing in bunkers. This study is set to demystify all these fallacies and to set out for public knowledge, all that is required to be done to practice the bunkering business in Nigeria. Ordinarily one is expected to understand what it takes to register and practice the trade in the country; who are the approving, monitoring and regulatory authorities for the practice - 4 - of the trade. Who are the bunker broker, buyer and seller. The types of bunker oil useable by ships. What are the various hazards in the trade? The role of the Niger-Delta militants in the practice of the trade and the promotion of illegality in the trade. New products, technologies and legislation are being introduced and new markets are being explored. What are the effect of movement within the two giant industries that bunkering trade is part of and operates in, that is shipping and oil? All these are fully examined. 1.3 OBJECTIVES OF THE STUDY The main purpose of this research is to appraise the bunker trade in Nigeria with emphasis on the Niger Delta Region and to demystify all that has been stated about illegal bunkering in Nigeria. It is also my personal decision and intention to advance the frontiers of knowledge in this specialized area of shipping and oil industry and to bring to light how the trade is being practiced in some developed selected countries of the world. The specific objectives included to: i. Identify the structure of the market in Nigeria especially in the Niger- Delta region ii. Identify the major players in the trade and their various roles iii. Highlight and explain how the trade is practiced in other countries iv. Highlight the present and projected demand and supply of bunkering services in the Nigeria especially in the Niger- Delta. - 5 - v. Examine the contribution which bunkering activity will make to the Nigerian economy, included here will be the contribution to GDP, Nation’s Balance of Payments, capital inflows to the Nigerian Economy, and incremental employment opportunities. vi. Assessment of expected environmental impact from ship bunkering, including oil spills from bunker handling, possible generation of fumes and or odors, risk from ship to ships bunkering etc. vii. Evaluate the impact of incidental oil spills on the fishing and agrarian communities in the Niger Delta as well as the population displacement, migration and ongoing violence attendant thereto. 1.4 RELEVANT RESEARCH QUESTIONS There are some basic questions that come to mind when dealing with issues like Oil Bunkering trade in Nigeria. Do we have an organized bunker oil market in the country Who are the major players and their various roles? Are there sufficient bunker infrastructures in place? Are there any economic benefits derivable to the country from oil bunkering trade when we have better structures in place? Are there sufficient controls and monitoring by the regulatory bodies to the market players? Does illegal bunkering really exist in Nigeria? Is illegal bunkering harmful to the country and who stands to lose from such activity? Is there any direct relationship between illegal oil bunkering and the crisis in the Niger Delta region of Nigeria? - 6 - 1.5 SCOPE OF STUDY This study is concentrated on all that is expected to be known about bunkering in Nigeria with emphasis on the Niger Delta Region and what happens elsewhere in the world. It would also look at the roles played by the bunker brokers and traders, and how the trade is regulated both in Nigeria and internationally. It examines the types of bunker fuel available and the vessels that utilized them. An attempt was also be made to look at the origin and history of bunkers. Recommendations have been made on the way forward and how the country can get maximum benefit from bunkering. The illegal oil bunkering trade in which the nation lost huge sums of money annually was reviewed and findings reported. 1.6 SIGNIFICANCE OF THE STUDY

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