Nigeria: delta of trouble
Nigeria planned to clean up its oil sector and increase production, but the optimism is fading
WHEN Muhammadu Buhari assumed Nigeria's presidency for the second time in May 2015, many hoped his new broom would sweep aside the problems dogging the oil and gas sector's development. An overhaul of the industry's organisational and investment frameworks and a serious push to tackle the causes of instability in the industry's Niger delta heartland were at the top of his agenda.
Just over a year on, progress has been patchy. New militant groups are now
bombing oil and gas installations in the delta, cutting supply drastically, while the long-delayed Petroleum Industry Bill (PIB), intended to redefine the state's relationship with its partners in the energy sector, remains where it was - bogged down by wrangling in parliament and unlikely to become law anytime soon.
It would be too easy, though, to portray this as yet another Nigerian government that has failed to live up to its promises. It was always going to take more than a year to sort out the country's thorniest problems, and Buhari's strategy of chipping away at some of the ones his government has most control over, like the restructuring of state oil firm
Nigerian National Petroleum Corporation (NNPC), has been generally welcomed.
Even Buhari's high-stakes gamble to redefine the government's relationship with militants in the Niger delta could yet pay dividends in the long run - if it leads to a more transparent and trusting relationship between Abuja and the delta communities.
The short-term consequences, however, have been anything but positive. An attempt to overhaul a murky web of payments to militants and communities put in place by previous governments to bring about a 2009 amnesty and peace deal has coincided with an upsurge in attacks on oil installations.
After several years of relative calm, a previously unheard-of group, the
Niger delta Avengers, began waging a fresh campaign to bring the oil industry to its knees, through sophisticated attacks on pipelines and oil platforms, including multiple attacks on the infrastructure serving Shell's 250,000 barrels a day Forcados export facility, as well as installations related to NNPC, Eni and Chevron operations.
Nigerian production averaged just 1.4m b/d in May, according to Opec, the lowest level for over a decade and dramatically down on the 1.8m b/d in the fourth quarter of last year.
By some estimates, Nigerian oil production slumped to as low as around 0.6m b/d for a short period in early June due to a combination of the attacks, technical problems and maintenance issues.
By some estimates, Nigerian oil production slumped to as low as around 0.6m b/d for a short period in early June
Production recovered somewhat in the following weeks, but prospects of a return to last year's levels - let alone reaching the government's 2.2m b/d target, are dim at best.
What the Avengers' political objectives are -indeed who they are and who is backing them - remains unclear. Statements from the group suggest they are from an educated younger generation seeking a better deal for the oil-rich-but-impoverished region by targeting infrastructure, but without harming people whether military or civilian.
The group seems anxious to stand apart from the pre-amnesty militants who battled security forces, and engaged in kidnap and extortion, as well as targeting oil facilities. Nonetheless, many in Nigeria speculate that the Avengers are led by former members of the
Movement for the Emancipation of the Niger delta.
The Avengers' use of scuba divers to blow up sub-sea pipelines may also hint at a connection with the previous wave of militants. Scuba diving was one of the skills taught to ex-militants after the 2009 amnesty agreement to provide them with paths to alternative employment.
After the group's first attacks, the Buhari administration initially took a belligerent stance against the Avengers, mirroring its tough approach to Boko Haram Islamist fighters in the north of the country. But the tone has since become more conciliatory - groups capable of halting the sector that provides 90% of the country's foreign earnings have a pretty strong bargaining chip.
At the time of writing, claims and counterclaims were circulating over whether the sides had held talks on a deal to end the violence. Either way, any meeting of minds or understanding of the group's objectives remain some way off. And the underlying causes of grievance in the delta - poverty, ecological degradation, and inequitable distribution of oil wealth - have been features for decades.
If the Avengers are a new breed of idealists set on achieving substantial autonomy or independence for the delta region, as some of their statements have suggested, they are unlikely to find a positive reception.
"What the delta Avengers want is just as important as whether talks should take place.
If they want to split up the Nigerian federation then that's not a negotiable goal under this government," says Patrick Smith, editor of newsletter
Such a stance would also raise uncomfortable comparisons with the civil war triggered by the failed secession attempt by Biafra - which includes the delta region - in 1969, that led to death and destruction on a massive scale. (Some Biafra groups in Nigeria's south continue to agitate for a separate state, and some have supported the Avengers' campaign.)
But if the militants' goals are ultimately more about boosting the economic prospects of the population in the delta then grounds for negotiation exist. The state may be able to channel further assistance across the region.
In June, the government said it was setting aside nearly NGN90bn (then about $450m, but since the naira was deregulated, about $310m) to bail out states in severe financial difficulties, as it sought to alleviate a nationwide economic crisis. Some of that cash could go to delta communities without it seeming too much like a government concession under pressure.
For oil firms, the security outlook in the delta is as confused as ever.
The region's biggest player, Shell, still plans to sell its onshore Nigerian assets, although local firms would be the likeliest buyers and they are short of cash.
Another deterrent to possible buyers is the threat of legal action for decades of environmental damage caused by leaks from pipelines owned by Shell and other operators.
President Buhari launched a
$1bn clean-up operation in Ogoniland in June, but it will be at least 18 months before work starts in earnest, and it could be a quarter of a century before the region regains its environmental health.
Operators in Nigeria's deep offshore remain largely unaffected by the delta unrest. Many of the staff working offshore do not even live in Nigeria - the most contact they have with the delta region may be the tarmac at Port Harcourt airport, where they change planes to fly out to the rigs. But ExxonMobil's offshore operations still managed to contribute to Nigeria's production slump in May, when the firm declared force majeure on exports of Qua Iboe grade oil after damage to a pipeline by a drilling rig.
But even if they can be insulated in the deepwater, international oil companies aren't rushing to invest in fresh production. Total's 200,000 b/d Engina project, due on stream in 2018, is the only sizeable project in the pipeline for the next few years. Nigeria is going to need every last drop of oil from its existing production capacity to support its ailing economy, but that looks like a tough task.
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