After a three-year shutdown caused by rampant oil theft and damage, Belemaoil Producing, a Nigerian independent oil producer, has resumed operations at its Oil Mining Lease (OML) 55. The company’s return to production marks a major milestone for Nigeria’s struggling oil industry, which has been grappling with severe losses due to the ongoing crisis of oil theft.
The news, first reported by Reuters, indicates that Belemaoil has restarted production at its block, located 40 kilometers west of the Bonny oil export terminal. The company suspended operations in 2021 due to the overwhelming scale of theft and damage to its facilities, which made it impossible to operate profitably. However, with the restart of operations, Belemaoil hopes to stabilize production and contribute to Nigeria’s oil output, which remains under threat from widespread illegal activity.
OML 55 is a critical asset for Belemaoil Producing, containing five oil fields that produce approximately 14,000 barrels of oil per day (bpd). The block also contains more than 70 million standard cubic feet of gas per day, making it a valuable resource for Nigeria’s energy sector. Belemaoil acquired OML 55 from Chevron Corporation in 2015, marking a significant step for the Nigerian producer in expanding its operations.
However, like many other oil companies operating in Nigeria, Belemaoil has faced immense challenges due to the country’s oil theft crisis. The company’s decision to suspend operations in 2021 highlighted the severe impact that theft and pipeline vandalism have had on Nigeria’s oil industry. Belemaoil’s decision to resume operations signals renewed hope for recovery, but the company remains cautious as oil theft continues to be a significant threat.
Nigeria has long been plagued by the issue of oil theft, which has cost the country billions of dollars in lost revenue. In 2022, Mele Kyari, CEO of the Nigerian National Petroleum Company Limited (NNPCL), revealed that nearly all of the oil output from Bonny, one of Nigeria’s key oil hubs, was being stolen. Bonny is also the town after which Nigeria’s premium crude oil, Bonny Light, is named. Bonny Light is a light-sweet crude oil that is highly sought after for its high gasoline yield, making it a popular choice for refiners in the United States, especially on the East Coast.
The NNPCL and the Ministry of Petroleum have estimated that Nigeria loses between 200,000 and 400,000 barrels of crude oil per day to theft. These losses are staggering, especially when compared to Nigeria’s total crude production. In August 2024, the country’s crude production averaged only 1.35 million barrels per day, which is below its OPEC quota of 1.5 million bpd. The lost barrels, coupled with the current price of Bonny Light at $78.62 per barrel, mean that Nigeria is losing billions of dollars in potential revenue every year due to oil theft.
The scale of oil theft in Nigeria has had a devastating impact on the country’s economy. Nigeria is Africa’s largest oil producer, and the oil sector is a major source of government revenue and foreign exchange earnings. However, the persistent theft of crude oil has crippled the country’s ability to fully benefit from its natural resources. The loss of hundreds of thousands of barrels per day not only affects Nigeria’s earnings but also discourages further investment in the oil sector.
In recent years, several international oil companies have chosen to exit the Nigerian market. These exits have been particularly concerning given that they have occurred not long after Nigeria passed the Petroleum Industry Act (PIA) in 2021. The PIA was meant to attract more investment into Nigeria’s oil and gas sector by providing greater regulatory clarity and incentives for exploration and production. Despite this, companies like Equinor ASA, the Norwegian oil and gas giant, have sold off their Nigerian assets, raising concerns about the future of foreign investment in the country’s energy industry.
In November 2023, Equinor finalized the sale of Equinor Nigeria Energy Company (ENEC) to local firm Chappal Energy. This sale is part of a larger trend of international oil companies reducing their exposure to the Nigerian market, largely due to concerns over security, oil theft, and regulatory challenges.
As Nigeria continues to lose billions of dollars in revenue to oil theft, the need for enhanced security and more effective policy reforms becomes increasingly urgent. The Federal Government has made several attempts to curb the activities of oil thieves, including deploying security forces to protect key pipelines and infrastructure. However, these efforts have had limited success, as criminal gangs and militants continue to exploit weak enforcement and the vast network of pipelines spread across the Niger Delta.
The Petroleum Industry Act (PIA) of 2021 was designed to address some of the regulatory and operational challenges in Nigeria’s oil sector. The law aims to improve transparency, attract new investment, and provide a more favorable environment for oil companies operating in Nigeria. However, for the PIA to have its desired impact, the government must also address the rampant theft and insecurity that have driven many investors away from the country.
