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Nigeria’s Kidnap Capital Forces Shell, Chevron to Cut Output

Bloomberg

 

By Dulue Mbachu

Feb. 18 (Bloomberg) — Foreign workers file off a morning flight at the airport in Nigeria’s petroleum industry hub of Port Harcourt, met by dozens of escort vehicles and scores of armed soldiers outside the terminal.

“Ten years ago a lone driver and myself made the drive into the city,” Mike Henderson, an oil-company engineer, says before driving off in the armed caravan. “Now it would be foolhardy.”

Today Port Harcourt ranks with Baghdad as one of the world’s most dangerous cities for foreign workers as criminal gangs and guerillas seeking greater control of energy revenue step up attacks, say job-placement firms. More than 300 oil industry employees, or two a week, have been kidnapped in the Niger River Delta since a surge in violence began in 2006, according to Oyibosonline.com, a Web site operated by expatriates.

The attacks have cut exports from Africa’s largest producer by more than 20 percent, and last month the Delta’s main guerrilla group said it was resuming a campaign against the industry after a four-month cease-fire. A union representing office workers said it may pull members out of the region after gunmen killed the 11-year-old daughter of a Royal Dutch Shell Plc employee and abducted her 9-year-old brother in Port Harcourt.

Nigeria is the fifth-largest supplier of U.S. petroleum imports, shipping more than 400 million barrels a year to America. Plunging prices and security concerns have cut output, and the government has said it will reduce spending of oil revenue that filters back to the poorest, most violent areas. Nigeria’s Bonny Light crude has dropped 69 percent to $46.72 a barrel since last July.

Production Down

Revenue may fall further after the Organization of Petroleum Exporting Countries cut production targets in December. Nigeria’s quota dropped 18 percent to 1.673 million barrels a day.

The Hague-based Shell, the country’s biggest foreign-owned producer, said output in Nigeria dropped to 360,000 barrels a day in the fourth quarter, from 1 million barrels a day in 2005. Exxon Mobil Corp.Chevron Corp.Total SA and Eni SpA also operate in Nigeria.

Improvements in security are needed before international oil companies can make the “enormous investments necessary over decades to unlock Nigeria’s full energy potential,” said Chike Onyejekwe, managing director of Shell Nigeria Exploration and Production Co., Shell’s deepwater subsidiary in Nigeria.

Port Harcourt, a city of 1.6 million was once the home of nightclubs crowded night and day with well-paid petroleum workers. Now dotted with heavily armed checkpoints, Port Harcourt’s transformation from a city that offered round-the- clock-fun to one offering round-the-clock fear shows how security has deteriorated as the region moved from agitation to rebellion.

‘Huge Toll’

Groups including the Movement for the Emancipation of the Niger Delta, which says it’s fighting for the poor, have targeted energy industry facilities to demand more of the wealth that’s pumped from the country’s poorest region.

“The landscape in the delta has changed from what it used to be,” said Tola Adeogba, Shell’s exploration manager in Nigeria. “The security situation is taking a huge toll.”

Most oil companies have either evacuated expatriates or keep them hunkered down in guarded compounds. The metal gates outside Shell’s offices in the city are flanked by two sandbagged positions manned by guards with automatic weapons.

At least 75 foreigners were kidnapped in the Niger Delta last year, according to Oyibosonline.com, named after the Nigerian word for white people. Arild Nodland, managing director of Bergen Risk Solutions, a consulting firm based in Fantoft, Norway, puts the number at 52 in 25 incidents. A record 167 abductions were recorded the previous year, he said.

Travel Warnings

While kidnapping dropped in 2008, attacks targeting the oil industry rose by 31 percent to 92, Bergen says. Increased company security, a government offensive around Port Harcourt and the relocation of expatriates reduced abductions, Nodland said.

Mercer, the human-resources unit of New York-based Marsh & McLennan Cos., ranks Port Harcourt with Baghdad, Yemen’s capital of Sana’a and Khartoum in Sudan, as the world’s most dangerous cities. Countries including the U.S. and the U.K. have issued travel advisories to their citizens to avoid Port Harcourt.

“Nowadays, a foreigner is a rarity on the streets of Port Harcourt,” said 52-year-old Pius Waritimi, a sculptor who has lived in the city for 25 years. “If you see any, he is at the risk of imminent abduction.”

The violence is fueled by a “cocktail of poverty, crime and corruption,” says the Brussels-based International Crisis Group, which works on conflict resolution.

Seventy percent of Nigerians live on less than $1 a day, according to United Nations data. Life expectancy is 46 years and 194 infants die for every 1,000 live births, placing Nigeria 158th of 177 countries in both categories, the UN says.

Oil Revenue Stolen

The contrast between Nigeria’s mineral wealth and the poverty of its people is most stark in the Niger Delta.

Oil industry operations and the pollution it brought destroyed traditional livelihoods such as fishing and farming, leaving the region with youth unemployment of more than 80 percent, the highest in Nigeria, according to ICG. Most communities lack power, clean water, health clinics and schools.

Most of the more than $400 billion in revenue generated by energy exports from the delta in the last four decades was stolen from state coffers by a succession of military and civilian regimes, dominated by the country’s majority ethnic groups, according to Nigeria’s Economic and Financial Crimes Commission.

Amid the poverty and corruption, kidnapping for ransom, crude oil thefts and extorting protection payments have become the most viable industries, the ICG says.

Of the expatriates seized in the delta in 2008, four were killed, bringing the number of foreigners murdered since 2006 to 12, Oyibosonline.com reports. Four people are still being held while the rest were freed unharmed.

‘Heed Our Warning’

MEND, the guerilla group, says foreigners aren’t welcome until demands for local control of oil wealth are met. Company executives are urging the government to negotiate with those that have genuine political demands to isolate the criminal gangs.

In response, the government has recommended doubling to 25 percent the energy revenue that goes to states in the delta region. The government has also designated a special minister to tackle development problems in the Niger Delta.

“Only foolish foreign oil workers would be caught napping when the real war begins,” Jomo Gbomo, MEND’s spokesman, said in an e-mail. “The wise ones have done well to heed our warning.”

To contact the reporter on this story: Dulue Mbachu in Lagos at[email protected]

Last Updated: February 17, 2009 18:01 EST

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