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How Shell Defrauded Nigeria Of 16 Million Barrels Of Crude Oil, DPR Complains

The Department of Petroleum Resources (DPR), a government agency, has written a petition, complaining of how the oil giant, Shell BP has unlawfully converted and wrongfully appropriated over 16 million barrels of crude oil from the Bonny Oil Terminal through the use of a manipulated and unapproved metering system.

DPR also accused Shell of understating the volume of crude oil which was pumped to the Bonny terminal.

The letters also alleged that Shell Petroleum Development Company Limited admitted and committed to refunding about 2.1 million barrels of crude to some local oil companies including Belema Oil, Newcross, AITEO and Eroton.

The disclosures were part of efforts by a group, Ethnic Youth Leaders (EYL) to have the Dutch owned Oil Company nationalized over actions inimical to national interest and national security.

The group is also escalating advocacy for government to nationalize SHELL sister companies in Nigeria.

In an Originating Summons filed in the Federal High Court by an affiliate group, Patriotic Youth Organization of Nigeria against the Federal Government and all the sister Shell Companies, the summon prayed the Court to order the federal government to expropriate, nationalize and take over all assets, investments and interests of Shell found anywhere or traceable within the Federal Republic of Nigeria.

“In the oil sector, government has over the years tried its best to increase local content by encouraging indigenous companies to enable them play significant roles particularly in the upstream sector which was hitherto totally controlled by International Oil Companies. The absence of Nigerian players in this sector meant that there was likelihood that Nigeria will be ripped off by some of the international oil companies for their own benefits or even those of their parent countries,” the group said.

“As you are aware, Shell is the operator of the Bonny and Forcados crude oil export terminals which has the capacity of 5.7 million barrels and 6.3 million barrels respectively. This has made Shell the largest exporter of Nigeria’s crude oil. Shell was also the owner and operator of the OML 29 and the Nembe Creek Trunk Line (NCTL) which it later sold sometime in 2015 to an indigenous company known as AITEO Eastern E & P Company Limited. This Company upon their acquisition of the Nembe Creek Trunk Line had an agreement with Shell, which as the operators of the Bonny Oil Terminal were to be the handlers of the crude oil injected into the Trunk Line by AITEO and other local oil companies that transport their oil to the terminal through NCTL.

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“In our crude oil handling, there are allocations made for water and oil theft which are calculated and then deducted from the total volume of crude supplied by the various companies. The methodology for calculating the water and crude theft allocations are determined by the Department of Petroleum Resources (DPR) on behalf of the Federal Government of Nigeria. This approved methodology is reviewed periodically in line with the Petroleum Act and issued as Guidelines by the DPR. In 2016, the DPR approved methodology was to be conducted with a metering system known as Leased Automatic Custody Transfer (LACT) and not any other system.

“However, following several complaints from Local Oil Companies (LOC’s) operating particularly on the Nembe Creek Trunk Line, the DPR conducted investigations and discovered that instead of using the approved metering system, Shell acting through its officers and agents, deployed a manipulated and unapproved metering system, known as the Coriolis Flow Meter. This unapproved metering system is intentionally used by Shell to under-report and divert the exact volume of crude oil which passed to the terminal, controlled by it, thereby shortchanging the Local Oil Companies and ultimately denying the country of scarce revenue.

“DPR carried investigation into the matter after which it informed Shell that the Coriolis Flow Metering system which it installed does not have any approval. This is in addition to other indictments against Shell by DPR. The
DPR went ahead to sanction Shell and imposed a penalty of only Two Hundred and Fifty Thousand Naira (N250, 000:00) for violations of the Petroleum Act and Mineral Oil Safety Regulation.”

The group added that “there is the urgent need for us to bring to the attention of the relevant institutions of State to intervene and recover from Shell the full value of all the stolen crude oil which it deliberately diverted through the use of the unapproved and fraudulent metering system; which it used to deliberately understate the exact volume of crude oil injected into the Bonny Oil Terminal.”

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