Rampant oil theft ravages Nigeria's Delta By Joe Brock DIEBU CREEK, Nigeria (Reuters) - The sound of fleeing feet rustles from the undergrowth in this swampy enclave in Nigeria's Delta, where a fire burns beneath an open tank of crude oil and black smoke fills the sky. Criminal gangs are quick to run when boats approach the illegal refineries all over the Niger Delta, a region of creeks and waterways latticed by hundreds of kilometers of unguarded pipelines pumping valuable oil. Standing in a foot of oily water, behind a steel tank of hot crude percolating down pipes, Peter, 38, explains how it's done. "We carry the crude, put it in these drums and then we cook it and it runs down these pipes," he said, oil dripping off his hands, a hood covering his face. "First we get gasoline, then kerosene and then diesel," he added, coughing as a wave of smoke gets sucked into his lungs. He gave only his first name; others asked not to be named at all. Almost three years since an amnesty was agreed with 26,000 Niger Delta militants, oil theft remains a major headache and is now on the rise, authorities and oil firms say. Although the illegal refiners only make up for a small portion of the theft, the environmental damage they do is huge. Oil spills from leaky pipes pollute vast tropical waterways. Shell, the biggest operator, says 150,000 barrels per day is stolen from Africa's top oil producer. Nigeria's Finance Minister Ngozi Okonjo-Iweala said that as much as one-fifth of government revenue is lost to oil theft. The small amount that is refined locally finds a ready market in a country whose legal refineries are largely defunct. "We're doing what they can't," quips one oil thief from his barge, a swipe at the Nigerian government's failure to refine much of the fuel it produces because of decades of corruption. Most of the theft happens on a larger scale, when coordinated groups of workers tap into oil infrastructure, siphoning crude into barges and motorboats before transporting the oil onto larger crafts a few miles offshore. The complicity of corrupt security officials and politicians means this is unlikely to end any time soon, although President Goodluck Jonathan's administration has pledged to crack down. Floating down waterways in Jonathan's home state of Bayelsa, dozens of plumes of smoke are visible from micro-refineries. The damage is incalculable: broken pipelines are abandoned and left to hemorrhage into the creeks, while deadly accidental fires desecrate several square kilometers of wetland vegetation. A visit to one site shows mangrove shoots tipped black where they immerse themselves into the water, dying trees sagging over the creeks and fires raging where illegal refineries are set ablaze by soldiers in periodic crackdowns. One barge carrying illegally refined fuel can be seen dropping off jerry cans to soldiers at a jetty. "I can assure you we are on top of the situation," Onyema Nwachukwu, Joint Task Force (JTF) spokesman, told Reuters in a barracks in Bayelsa's capital, Yenagoa. He gave few details. At the height of the conflict in the Delta, in the late 2000s, militants could move global oil prices with large-scale sabotage attacks on pipelines and flowstations. In 2009, the government agreed an amnesty with the militants, who agreed to give up their arms in return for training programs and a 65,000 naira-per-month stipend, about three-and-a-half times Nigeria's minimum wage. Although thousands have been trained in everything from welding to flying planes, there are not always jobs for them, and more than 10,000 have yet to be trained in anything at all. Many ex-militants complain that they only receive a small portion of the stipend, while their former commanders pocket most of the hand-out. The militants said they were fighting for freedom from the shackles of foreign oil firms and corrupt government. But many were criminal gangs stealing crude, kidnapping oil workers and fighting turf wars with little interest in changing the Delta. Since the amnesty, violence has subsided and at first oil theft dipped. But while former militant leaders sit in opulent homes in the capital Abuja or enjoy lucrative government contracts, their foot soldiers, bereft of such luxuries, are reverting to old habits. And newcomers are joining in. "Small scale bunkering and illegal refining is becoming more decentralized and freelance because of turf left open by militants," an oil security official in the Delta told Reuters. Although the government allocated a portion of the budget to regenerating the Niger Delta after the amnesty, many local politicians have not delivered the promised jobs, roads, schools and hospitals, and unemployment has not fallen. Don't talk to me about the amnesty. I get 25,000 naira, not the 65,000 they promised. It was all a scam," said a large figure sitting on the edge of a barge, who identified himself by the nickname 'Killer'. If they had given me a job I wouldn't be doing this. On the far side of the river bank, crude oil worth hundreds of dollars every minute was being pumped into barges balanced and shifted by six ex-militants, barking orders at each other, nervously looking around to check for the JTF. The destructive methods of the thieves have helped to further ruin fishing habitats and contaminate water already degraded by decades of oil production in the area. Children wash in rivers filmed with shiny oil. There are no roads to many villages, pushing food and fuel costs three times higher than in wealthier urban regions. The United National Environment Programme (UNEP) said it would take 30 years and an initial $1 billion to clean up the dangerous levels of pollution and environmental degradation in Ogoniland, a small portion of the Delta. The report found one community was drinking water contaminated by deadly levels of benzene, which causes cancer. Security sources believe without genuine regeneration, criminals could return to war. Yeah, we got amnesty, but nothing changed. This is all we have to do," one of the oil thieves said. "If nothing changes we'll be back to the guns," another said. We'll kill the oil companies, the JTF, all of them. Additional reporting by Tife Owalabi; Editing by Tim Cocks and Sonya Hepinstall