Magazine article African Business

Deadly Mixture of Guns and Oil: Those Living, or Trying to Make a Living, in the Oil-Producing Delta Region of Nigeria Have Always Demonstrated Acute Resentment at the Way They Have Been Treated by the Government and Oil Companies; Now, as Neil Ford Reports, There Seems to Be an Upping of the Ante

Magazine article African Business

Deadly Mixture of Guns and Oil: Those Living, or Trying to Make a Living, in the Oil-Producing Delta Region of Nigeria Have Always Demonstrated Acute Resentment at the Way They Have Been Treated by the Government and Oil Companies; Now, as Neil Ford Reports, There Seems to Be an Upping of the Ante

Article excerpt

Government reforms finally seem to be making a big difference to Nigeria's economic stability. The revolution in the banking sector has taken many by surprise, the country is developing one of the world's biggest gas industries and some progress has been made on nurturing a significant non-oil sector.

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Yet the various social, ethnic, regional and religious differences that have long helped to stifle development are continuing to undermine the progress that has been made. Inter-religious attacks have left many dead, while the Niger Delta has once again erupted, highlighting deep divisions and inequalities within Nigerian society.

The recent spate of kidnappings, shootings and pipeline blasts in the Niger Delta have had a massive impact on oil production. Shell's output fell by 455,000 barrels a day (b/d) for a time, forcing international oil prices up by between $1 and $2 a barrel.

Nigerian crude is particularly important because it is mostly light sweet crude, which is favoured by refineries around the world. Other Opec states are operating at close to full capacity at present and there is little spare capacity to compensate for supply disturbance, such as the current instability in the Delta.

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Supplies of refined petroleum products have also been affected by a second bomb attack in recent years on the pipeline that supplies the 125,000 b/d Warri oil refinery. The plant was able to continue production for three weeks as it was able to use stores of crude oil but Nigeria has too little refining capacity to be able to cope with the loss of so much capacity.

A new group called the Movement for the Emancipation of the Niger Delta (Mend) has admitted responsibility for some of the attacks and kidnappings. Some of the hostages have been released and most say they have been well treated but there have been fatalities elsewhere.

An assault on premises owned by Italian oil company Eni-Agip in Port Harcourt resulted in the deaths of eight policemen; while there have been several other shootings and militants also set fire to the Forcados export terminal. Mend has threatened 'total war' in an effort to drive the oil companies out of the Niger Delta, arguing that their operations have resulted in deteriorating living standards in the area.

However, some of the pipeline attacks have stemmed from the various gangs who steal oil to sell on the black market.

Is government unconcerned?

Given that the onshore and shallow water fields of the Niger Delta are estimated to contain about 35bn barrels of oil and most of the country's proven natural gas reserves, it might be expected that the instability would be a major government concern.

Yet Nigeria's oil minister Edmund Daukoru tried to play down the impact of the unrest, arguing that all of the reduced production capacity would be quickly restored. He said: "We have never had a Niger Delta situation where we had a large volume of production taken out for a long time. This was an isolated incident."

Daukoru himself comes from the Niger Delta and he has put some time into finding solutions to the problems of the area since being appointed as presidential adviser on petroleum and energy.

It is true that unrest and armed attacks in the Niger Delta are nothing new, but the frequency of the disturbances has varied greatly over the past 20 years.

Although there is a great deal of resentment towards the oil industry for the various instances of air, water and land pollution, the poverty of many people in the Delta lies at the heart of the problem. The wealth generated by the oil industry has benefited the oil majors themselves and particularly individuals in Nigeria, but the bulk of the population has seen little benefit from the development of national natural resources.

In any event, social unrest and armed attacks are unlikely to have much impact on Nigeria's expanding deepwater arena, where most of the country's new production capacity is being developed, precisely because the oilfields are located some distance offshore. …

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