INTRODUCTION
Theft of oil costs oil companies, governments (and the communities they serve) hundreds of millions of dollars each year in Nigeria alone. In addition to loss of revenue, oil theft fuels violence and insecurity, feeds corruption, finances the purchase of weapons, corrupts youth, escalates youth unemployment, causes environmental pollution and destabilizes communal life.
The concept of oil certification follows the success of the “conflict diamonds” initiative and aims to hit the well-organised theft of oil by choking off the market for the stolen oil and interrupting the supply chain.
CONCEPT
Tackling oil theft requires action on both the demand and supply side. It also requires attention to the root causes of the problem. Following the success of the “conflict diamonds” campaign and work on disarmament, there is a clear opportunity to address oil theft by including a focus on the market for the stolen oil in a comprehensive strategy that would include the following measures:
Supply
- Law enforcement activities (e.g. monitoring ‘oil theft hot-spots’ and navy checks);
- Initiatives on corruption and transparency;
- Providing sustainable developmental alternatives to communities at the source of the theft (e.g. micro-credit schemes, community development projects);
- Tracking funds from oil theft and stopping associated revenue flows through banks.
Demand
- “Fingerprinting” oil at source, during transport and at refineries;
- Auditing refineries for processing illegal oil;
- Establishing common industry-wide positions and action;
- Pressuring markets to only accept “legal” oil.
Effective action on the supply side needs to occur in the context of initiatives on corruption and transparency. This will press the domestic aspects of illegal bunkering that give these activities room to operate. Action will be required in the domains of law enforcement and ensuring transparency in revenue flows through banks.
Oil certification will target the demand side where oil is transported and refined. Central to the demand strategy is oil “fingerprinting” or certification that is critical in hitting the well-organised theft of oil by choking off the market for the stolen oil. Oil can be “fingerprinted” and uniquely identified. This means that oil can be analysed to determine its source. In this manner tankers and refineries can be checked for stolen oil. This can and should be complemented by audits on oil processing levels, and particularly whether refineries are processing oil ‘not on the books’.