Crude Oil short-change: Shell, Aiteo et’al and other serious matters

By: Ifeanyi Izeze

No doubt, the recent injunction of a Federal High Court, Lagos, barring Royal Dutch Shell’s Nigerian subsidiary from withdrawing money at 20 local banks until it ring-fences potential damages in a lawsuit brought against the oil major by Aiteo Eastern E&P, an indigenous operator, is a welcomed development in our nation’s effort to checkmate the widespread malfeasance and blurred business dealings by multinational oil operators in this country.

For as long as they’ve been in the Nigerian arena, most if not all, the foreign operating multinationals have often indulged in willful unfair practices and underhand activities against our national interests. And the case of Aiteo against Shell is just one in a million of such wuru wuru dealings which has characterized the conduct of the foreign operators in our oil sector.

The worst part of the whole insanity is that too many insatiably greedy privileged Nigerians at the corridors of power at different times and in the NNPC are aiding and abetting the ruining of their own country by the western and lately Chinese interests operating in Nigeria.

The bone of contention in this rare legal tussle between Shell and Aiteo is that between 2016 and 2018, Shell putting to use a metering device not approved by the Department of Petroleum Resources (DPR) short-changed local operators, Aiteo, being the hardest hit, to the tune of millions of barrels of produced crude oil.

Aiteo, alongside some other indigenous oil producers, have had a protracted dispute with Shell alleging that the company short-changes them using unapproved methodology to calculate the volume of crude it lifts on their behalf from the terminal. These indigenous operators alleged that Shell deploys underhand practices including using unapproved meters dubiously calibrated by the Anglo-Dutch giant to facilitate crude theft from the smaller Nigerian oil companies that uses its facilities to transmit their produced oil to Shell’s Bonny export terminal tank-farm.

As said, the interim Mareva injunction by the Lagos High Court is aimed at recovering the cash value of the millions of barrels of crude allegedly diverted from Aiteo, an indigenous operator by the Anglo-Dutch oil giant.

Court documents show that Aiteo is seeking about $4 billion in total over alleged problems with the Nembe Creek Trunk Line (NCTL) pipeline it bought from the Anglo-Dutch group in 2015 and over claims Shell undercounted its oil exports.

Aiteo also accuses Shell of deliberate improper metering of the Nigerian company’s oil exports from the Bonny Light terminal. It is seeking $2.7 billion over the pipeline deal plus $1.28 billion for lost oil sales, the court documents show.

Is it not curious that before Aiteo approached the court, the DPR, the government regulatory agency of the oil and gas industry in its settlement after investigations had ordered Shell Nigeria to refund 2,081,678 barrels of crude oil understated between 2016 and 2018 to the affected local oil companies including Aiteo, Eroton, Newcross and Belema Oil.

In an official communication, signed by M. Alaku, titled, “Allocation of Bonny Terminal Gross Volume From June 2016 to July 2018 Based on Comparison of Metered Gross Volume Between the Coriolis Meter and LACT Unit Installed on the NCTL,” the DPR demanded that Shell should return the missing crude amounting to over 2 million barrels to the affected local oil companies including Aiteo, Eroton, Newcross and Belema Oil.

But because the Anglo-Dutch oil giant has no iota of regard for Nigeria’s constituted authourities and thinks it can do whatever it wants and get away with it (as has been its practice) because of corruption in our system, now this case is snowballing into a dirty scandal of international dimension. And be sure that more of such cases are coming involving some other foreign multinational operators.

What is clear in this case is that some barrels of crude oil were indeed missing during the period under review and the Nigerian unit of the Royal Dutch Shell has indeed agreed to return the missing commodity.

It is very clear that Shell and its co-travellers deliberately installed the Coriolis meter in bad faith and this was meant to deceive Aiteo and other smaller Nigerian oil concerns regarding the amount of crude oil volumes due to them.

As affirmed by industry experts, the Coriolis meter has poor zero stability which affects flow meter accuracy. So it cannot be used for fluids with lower density and sensitive to external vibration interference, among others.

The angle the Nigerian government authorities are not taken seriously is that this exposed fraud which is prevalent in our nation’s upstream is beyond mere crude oil theft. It borders heavily on national security and financial crime.

The case of short changing Aiteo, Belema Oil, Eroton and NewCross through improper metering is just a scratch in the magnitude of the harm Shell, Agip and the rest of them have perpetrated against our national interest in the oil industry. Some government officials and retired military generals know this all the while but because they are all complicit in the crime nobody is saying anything while the foreign multinationals now including the Chinese are having free hands to do with our oil what they want with impunity.

Top managers of the NNPC especially NAPIMS and some other strategic business units are all part of this widespread fraud in accounting for the produced crude oil in this country. Is this how a serious country runs?

Imagine that we are talking of over 2 million barrels stolen from one or two small indigenous marginal producers within just two years. This will give you an idea of what these foreign multinational companies had done to Nigeria. If they can install fraudulent meters to undercut poor marginal producers, what should have happened at our various crude oil export terminals?

The entire Nigerian shallow and deepwater arenas are littered with Floating Production and Storage facilities (FPSO). And this is the frontiers where oil wells/fields are bleeding as if there is not tomorrow. Who checks how these foreign operators account for produced oil on those facilities- DPR and NAPIMS or the DSS? Abegi!

Though the Lagos High Court judgement in favour of the Nigerian independent is worth celebrating, if Aiteo thinks it has won the case or it’s going anywhere with it, the company should better have a rethink because in our courts, everything can turn 360 degrees around overnight and this is what is going to happen. Mark my words!

It has been said serially that our court systems is one of the biggest obstacles to the nation’s fight against corruption and other financial crimes.

These western multinationals and even the Chinese have come to know how to manipulate our judicial system more than any of us in this country. They understand very well that the highest bidder wins the case in any situation no matter how bad their case.

Recall what happened to the federal government’s litigation against Shell, Agip and others over their frauds in crude oil volume under-declarations. This particular case was meticulously proven with documents and data from foremost American metric companies and even the FBI to show that the declared volumes of lifted crude oil exports from Nigeria by these companies were incredibly far lower than the actual volumes discharged at the various receptor facilities in the U.S and China. But what happened?  Suddenly the Lagos High Court made a 360 detour and quashed it for “lack of sufficient evidence to prove the allegation of under-declaration.”

The Federal Government promised to appeal the judgement and for about four years now has the Attorney General done anything towards appealing the case? Nothing till today! That’s the country we call Nigeria.

Until our patriotism gets to the level of fanaticism and it’s gradually getting there, nothing is going to change in this country because the injustice and the endemic rot in this country has become systemic and traditional. God bless Nigeria!

• IZEZE is Guest Columnist (Email: [email protected]; SMS +234-8033043009