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Nigerian Oil Threat

Energy Wire

Nigerian Oil Threat

washington.com Newsweek

While the fur has been flying on financial markets, the bullets have been flying in the Niger Delta. The Niger Delta news didn’t make many headlines last week, but the conflict there continues to be a major drag on oil supplies — and with the Nigerian government in disarray, there’s no end in sight.

The usually accurate spokesperson for the Movement for the Emancipation of the Niger Delta (MEND) reported in an e-mail that there had been several new attacks on oil facilities last week. On Friday, Royal Dutch Shell acknowledged that an “upsurge” of attacks had taken place and that earnings would take a hit as a result.

Bloomberg quoted Nigeria’s state oil company as saying that the country’s daily crude oil output has fallen by 280,000 barrels since Sept. 13, as a result of MEND’s attacks in the Niger Delta region. Crude production fell 22 percent to 1.9 million barrels a day since the end of 2005, when the country was pumping about 2.5 million barrels a day, Bloomberg said. A senior European oil executive told me that the total amount of production lost as a result of fighting could be as high as 1.2 million barrels a day, and that if the fighting were to stop and production were to return to normal, output could top 3 million barrels a day. That would help drive down world prices, which dipped this week before rebounding to $104 a barrel.

But fighting isn’t likely to end soon. That’s partly because the Nigerian government may step up efforts to crack down on insurgents, especially if rival government officials in the capital city of Abuja want to prove their toughness. As the Eurasia Group, a consulting firm, noted in a update on Friday, 

“The new counter-terror law passed by the Nigerian Congress signals a renewed military offensive against the MEND, as well as the termination of the floundering peace summit plans. Moreover, the health of President Umaru Yar’Adua continues to be a question, raising concern about political instability around the succession process if he dies.”

 

In an August report, the Eurasia Group noted that Yar’Adua had reshuffled military leaders before going on a “little hajj” to Saudi Arabia, where he might have received medical treatment for kidney and/or cardiovascular problems. Worried about a possible coup, he sent two dozen officers into retirement. If Yar’Adua dies, the vice president would bring a different ethnic group to power. Yar’Adua and northern Muslim elites may be trying to change the succession order.

None of this augurs well for making peace in the Niger Delta.

Here a few examples of what the MEND spokesperson, who goes by the name Jomo Gbomo, has been reporting about an offensive that he or she calls “Hurricane Barbarossa.” He has a distinctive style and consistent point.

The week started like this: “At 2210 Hrs on Monday, September 15, 2008, a major crude oil pipeline at Bakana Front in Degema Local Government Area in Rivers state of Nigeria belonging to the Shell Petroleum Development Company was destroyed with high explosives by Movement for the Emancipation of the Niger Delta (MEND) detonation engineers backed by heavily armed fighters.”

The next day Gbomo said: “About 2200 Hrs on Tuesday, September 16, 2008, fighters from the Movement for the Emancipation of the Niger Delta (MEND) and the Niger Delta Volunteer Force (NDVF) in a new alliance attacked and destroyed the Orubiri flow station operated by the Shell Petroleum Development Company in Rivers state of Nigeria.

“All the soldiers on guard were killed and provided more weapons for the campaign. Their houseboat was equally destroyed…

“Soldiers and oil workers are advised to abandon all oil facilities including the off shore rigs of Bonga and Agbami as we want to minimize casualties before Hurricane Barbarossa arrives….A word is enough for the wise.”

The next day, he reported: “A very major trunk crude oil pipeline we believe may belong to both Agip and Shell has been blown up today, September 17, 2008 at about 0930 Hrs by our explosives specialists at Rumuekpe, in Rivers state of Nigeria.”

And the following day Gbomo had more to report: “At 1830 Hrs today, September 18, 2008, fighters from the Movement for the Emancipation of the Niger Delta (MEND) using high explosives have destroyed a major pipeline belonging to Shell Development Company at the Elem-Kalabari Cawthorne Channel axis in Rivers state of Nigeria.

“A gunboat patrol who happened to bump into the MEND fighters begged for their lives and showed their magazines to proof that they had not fired from their guns. They were spared and allowed to go but not after they had pledged loyalty to the struggle and denounced the criminality of the oil companies and the government. One of the soldiers actually defecated in his trousers.”

On Sunday Gbomo said that the offensive called Hurricane Barbarossa had been “downgraded” to a “tropical storm” and that MEND would declare a ceasefire. It’s always hard to tell whether that sort of thing is done out of magnanimity or necessity, but there’s no denying that it was a rough week for the oil companies in the delta.

Shell said it was “deeply concerned” about casualties and civilians. “We are equally concerned about the resultant damage to oil and gas facilities and possible environmental damage caused by crude oil that has been spilled from damaged equipment,” the company said in an email. The company urged dialogue. “This is desirable not just because of oil and gas production but also for the sake of millions of innocent, law abiding residents of the Niger Delta whose safety and means of livelihood are severely impacted by the crisis,” Shell said.

You would think this hassle would be enough to send the oil companies packing, but there is enough high-quality oil in the Niger Delta that they are willing to wait. And wait. And wait.

Paolo Scaroni, the chief executive of the Italian oil giant ENI, talked about this during a stop at the Post this week. “It’s very oil rich,” he said. He said that ENI has been doing business in Nigeria since the 1950s, even during the Nigerian-Biafran war, the civil war that lasted from 1967 to 1970. The secessionist Biafra region included much of the oil production region in the delta. Scaroni said that if ENI could wait through that bloody conflict, it could wait now. But, he acknowledged, “It’s not Switzerland.” 

http://newsweek.washingtonpost.com/postglobal/energywire/2008/09/oil_blues_in_the_niger_delta.html

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