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The Business: Warlords in Nigeria fall out over who has oil riches

The Business: Warlords in Nigeria fall out over who has oil riches

“… Shell is the most vulnerable to unrest in the Delta. Its joint venture with Nigeria’s state oil company turns out 1m barrels per day, making it the second largest oil producer in the Shell Group worldwide. Approaching 30% of all oil reserves controlled by Shell are found in Nigeria. Asari is aware of the company’s vulnerability – his last round of attacks forced Shell briefly to evacuate 254 staff from the Delta.”

Sunday July 24, 2005

THE most sensitive issue facing Nigeria – the distribution of oil revenues will come to a head over the next 12 months. Unless a solution is found, violence is likely to erupt in the Delta region of the south of the country, where most of the 35bn barrels of proven oil reserves lie.

Such an outcome would drive up global prices and threaten the interests of some of the world’s largest companies.

The spark for renewed unrest in Africa’s largest country, with 130m people, may already have occurred. On 12 July, a national political reform conference, called by President Olusegun Obasanjo, broke up without agreement. This gathering was charged with debating constitutional changes and, most importantly, deciding a new formula for the distribution of national oil revenues.

At present, the five states of the Niger Delta receive 13% of oil receipts. Their representatives at the conference demanded an immediate increase to 25% followed by a graduated rise to 50% in the next five years.

This is unacceptable to delegates from the northern, largely Muslim states, who have conceded an increase in the Delta’s share of oil money to 17%. But they are unwilling to go further.

Representatives of oil-producing states walked out of the meeting in protest. They had little choice given the strength of popular anger in the Delta.

Throughout Nigeria’s 45 years of independence, most of the oil wealth derived from this region has been spent elsewhere, especially the Muslim north Ð homeland of most of the country’s leaders.

The Delta people say they have borne the environmental cost of oil production while enjoying little of the benefits.

Their anger is coming to a head because:

* A multitude of armed militias has emerged, led by erstwhile warlords who whip up popular feeling. The most prominent is the Niger Delta People’s Volunteer force led by Al-Haji Mujahid Dokubo Asari. His gunmen aim to create an independent state for the Delta’s Ijaw tribeby armed struggle.

* The breakdown of the conference will boost Asari and the other militia leaders. They will point to the failure of peaceful means to achieve a fair share of oil revenues – and say that violence is the only option.

* The breakdown will also undermine the standing of moderate Delta leaders, notably Peter Odili, governor of Rivers state, Diepreye Alamieyeseigha, governor of Bayelsa state, and Oronto Douglas, commissioner of Bayelsa state.

High oil prices have given Nigeria a sudden windfall. The government’s budget assumes an oil price of $25 per barrel. With the actual price at more than twice this level, the federal administration has $8.3bn in its excess account.

The knowledge that official coffers are filled with cash – a constant theme of Asari’s speeches – will make the Delta people even more determined to secure a larger share of a growing national cake.

Nigeria’s oil production, now running at 2.3m barrels per day, will rise considerably over the next three years. Projections suggest that national oil revenues of about $22bn this year will be at least 30% higher in 2008, even allowing for a downturn in world prices.

Delta leaders want to agree a new formula for distribution before these gains come on stream. Last September, Asari helped to push world oil prices above $50 a barrel when his gunmen launched attacks across the Delta, costing hundreds of lives. This violence won him direct talks with President Obasanjo, though no agreement was reached.

In earlier fighting in 2003, a collection of militias briefly halted almost 40% of Nigeria’s daily output. They deprived Shell of 320,000 barrels per day. Obasanjo was forced to deploy the army and navy to restore order.

Of foreign companies present in Nigeria, Shell is the most vulnerable to unrest in the Delta. Its joint venture with Nigeria’s state oil company turns out 1m barrels per day, making it the second largest oil producer in the Shell Group worldwide. Approaching 30% of all oil reserves controlled by Shell are found in Nigeria.

Asari is aware of the company’s vulnerability – his last round of attacks forced Shell briefly to evacuate 254 staff from the Delta.

Asari-s ultimate aim of an independent Ijaw state is a wildly unrealistic goal. Asari has only a few hundred gunmen and Nigeria-s armed forces would be able to crush a bid for independence with ease.

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