Saturday, March 17, 2012

nigeria: oil cuts as delta erupts

allafrica | As the government contends with a Boko Haram militia determined to make the north ungovernable, a new round of attacks has erupted in the oil-producing Niger Delta.

Apart from the financial damage of a new Delta crisis, it adds to the government's credibility problem. As a government led by Niger Deltans, it was expected to pacify and then start developing the region.

Addressing the ecological and socio-economic devastation in the Delta would realistically take decades; local communities expect their government to make palpable progress with investment and job programmes. There is little sign of that happening: instead, local political feuds and vendettas are being pursued with the help of militant groups. Some of the worst clashes are between rival factions of the governing People's Democratic Party (PDP).

The latest violence there, in President Goodluck Jonathan's political base, threatens the government's amnesty deal with militants and costs the economy as much as a million barrels of oil per day. Nigeria was producing some 2.7 mn. barrels per day in February, compared with its potential of 3.7 mn. bpd. Industry sources say there's no prospect of hitting 3.7 mn. bpd in the near future, mainly because of insecurity.

Over half of production is now offshore and better protected from attack. Now, the rise in piracy in the Gulf of Guinea is also changing security calculations at sea. Of current production, a further 140,000 bpd are lost to elaborate schemes of bunkering and oil theft run by militant groups and pirates, according to Royal Dutch Shell. For now, the biggest pressure is around the onshore oil fields operated by Shell and Chevron. Offshore piracy in the Gulf of Guinea is growing, posing risks to international shipping along one of the continent's busiest routes. Small, agile gangs in speedboats board vessels, raid them for oil and other cargo and move on (AC Vol 52 No 21, From Delta militias to piracy). Insurance premiums are rising. Piracy is an international problem under investigation by the United Nations (AC Vol 52 No 20, The Security Council lands a new African problem).


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