CHAPTER ONE
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 fuelling of ship. It could be likened to establishing a floating fuel service station on the high 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 Billion 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 nation develops. But the practice only enriches few individuals who criminally convert 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 belong 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 around $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 bunker as the infrastructure belongs to the Nigerian Government and the oil companies. They simply smile to the banks with millions of dollars every day. It has also been repeatedly alleged 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 kilometres. 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 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 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 specific objectives included to:
1. Identify the structure of the market in Nigeria especially in the Niger- Delta Region.
2. Identify the major players in the trade and their various roles.
3. To ascertain the relationship between nigerian’s FEPA and the IMO on marine pollution.
4. Highlight and explain how the trade is practiced in other countries.
1.4 RELEVANT RESEARCH QUESTIONS
There are some basic questions that come to mind when dealing with issues like Oil Bunkering trade in Nigeria. These include:
1. Do we have an organized bunker oil market in the country?
2. Who are the major players and their various roles?
3. Do you think there is good relationship between Nigeria’s FEPA and the IMO on marine pollution?
4. Is bunkering business lucrative in other part of the Nigeria outside the Niger Delta Region?
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
The study is important, as it has helped to demystify all that secrecy that has shrouded the subject of oil bunkering in Nigeria. It is expected that the research will contribute more to the frontiers of knowledge as much was revealed in the course of the study. Both the maritime and oil industries stand to benefit immensely from the results of this research, especially as its recommendations may lead to government action in regulating the trade thus improving its contribution to the growth of the economy.
Behind all that is known as illegal bunkering there is a resemblance of organized bunker trade in the country. This study has identified the major players in the trade and regulatory policies aimed at checking substandard practices and illegal bunkering. Clearly an organized bunker market will add value to the economy more so as Nigeria has the ambition to become one of the leading economies by the year 2020.
1.6 LIMITATION OF THE STUDY
The major problems faced in this study included the following:
a) The absence of reliable data on the volume of organized bunker trade in the Nigeria’s Niger Delta.
b) Failure of the Trade practitioners in responding to sent questionnaires.
c) Time constraint on the part of the researcher as this study was carried out on part-time basis.
d) Inability to use more vigorous statistical techniques due to poor responses and lack of adequate data from bunker trade practitioner.
1.8 DEFINITIO OF TERMS
Oil: A thick liquid obtained from under the earth’s surface from which petrol comes.
Bunkering: It has to with the fuelling of ships.
Trade: Is simply the buying and selling of goods and services.
Economic: Relating to trade, industry and money.
Implications: The effect that an action or decision will have on something else in the future.
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