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UpstreamOnline: Nigeria oil caught in the crossfire of chaos

By Upstream staff

The decision by two services companies to pull out of the Niger Delta highlights growing concerns about the deteriorating security situation in Nigeria in the run-up to next spring’s elections.

Shell, the biggest oil operator in the country, has stuck to a consistent line that business remains difficult there but it has no intention of abandoning a key producing area.

However, US engineering company Willbros and German construction group Julius Berger have shown that some foreign businesses are losing patience and pulling out until the security situation improves.

There is no doubt that the security situation is getting worse there have been seven abductions of mainly expatriate oil workers this month alone.

One foreigner was released unharmed last weekend but seven remain captive.

The Nigerian army has been trying to crack down on the problems, leading to the arrest of 150 people in recent days and to a fire fight leaving 10 dead militants.

But 500,000 barrels per day remain shut-in and experts who follow the country such as Thomas Pearmain at Global Insight–are not optimistic things will improve in the near future.

Criminal gangs are heavily involved in the spate of kidnappings, but the bulk of the militant activity is being co-ordinated by groups such as the Movement for the Emancipation of the Niger Delta (Mend).

Mend is fighting essentially for political goals and wants more of Nigeria’s oil wealth to be distributed among the people, many of whom still live on close to $1 a day.

Oil companies see their future way offshore. The big Nigerian fields such as Bonga are remote from the shallow waters of the Delta and are less likely to be attacked, although there has been an isolated assault by militant gunboats on a remote platform.

In theory, the elections in April offer the chance to wipe the slate clean and start again with the ending of Olusegun Obasanjo’s reign as president. However, it remains far from certain who will replace him.

It is hard to build a coalition of interested parties in a country divided along religious, tribal and ethnic grounds.

Obasanjo is keen to ensure that his deputy, Atiku Abubakar, a presidential hopeful, does not win.

Abubakar’s chances are already being damaged by links to an FBI probe into the business dealings of Louisiana Congressman William Jefferson.

Even if there is a clear cut victory in the polls, there can be no guarantee that the chaos will end.

The West sees Africa’s most populous country and the US’ sixth most important oil provider as an arena where democracy should be encouraged.

Nigeria is far from perfect but it has begun to try to tackle endemic corruption and other problems and has moved away from the military government of the past.

It needs help as much as constructive criticism.

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