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The JTF Assault and Nigeria’s Oil Industry
- By Uchenna Kalu
- Published May 26th, 2009
- EnergyWorld
- Unrated
Tension in the oil producing Niger Delta region has reached unprecedented point with the latest assault by the Nigerian military on the militants. UCHENNA KALU here considers the effect of all this on the oil industry.
Introduction
THE crisis in the Niger delta region took a frightening turn last week. It was horrific especially for thousands of residents of the Gbaramatu Kingdom and environs, in the Warri South West local government of Delta State, hosts to Camp 5 base of some militants in the Niger Delta region.
Apparently on orders from the federal government, the JTF operatives moved against the suspected hideouts of the militants to finally flush out the rampaging armed youths who have supposedly become a terror in the land.
But in the process of the undeclared war, innocent residents especially women and children were caught in the crossfire. In the displacement, many became refugees in their homeland, exposed to the inclement weather and without the basic necessities of life.
Nigerians woke up Monday morning to be confronted with the pitiful sight of displaced and distraught citizens who were mere victims of a show of brute force by soldiers against the armed groups who claim to be fighting for the emancipation of the region from the shackles of successive governments that have failed to consider the plight of their people whose lands provide the wealth of the nation.
That business and commerce will slow down in the area is to underscore the impact of a crisis of that magnitude on an area. It’s enough to drive away investors from the state. Rivers State, also noted for militants’ activities, is a perfect example of how not to lift militancy to a high pedestal in the life of a people. Most investors have run away and are now being lured back.
Another weighty point to consider is the effect of all these on the upstream sector of the oil industry and by extension, the country’s exports of crude.
Heightened Insecurity and Loss of revenue
Whatever may later be the outcome of the military offensive, the immediate fallout would be an increase in the level of insecurity in the area. The activities of the militants have already battered the security situation with oil companies closing parts of their operations in force majeure.
In the week leading to the JTF attack, the Movement for the Emancipation of Niger Delta (MEND) cautioned those in the oil industry to steer clear of all oil facilities in the region because of the “Oil War” it has declared against the federal government for allowing its troops to bomb its base at Elem-Tombia. It further warned: “A word is enough for the wise. MEND reiterates its previous warnings to all oil workers in the entire Niger Delta region to evacuate from oil facilities and halt production with immediate effect or they will have themselves to blame.”
International vessels were also warned not to come in to load crude oil. Owners of such vessels were cautioned “not to be stupid to disregard the warning because the vessels will suffer the same fate like the Alakiri flow station”. They said hostages will not be taken and should not be deceived that the Nigerian military can protect them.
According to industry sources, Nigeria’s oil production has fallen to less than half its capacity as fighting escalates.
The country now pumps about 1.6 million barrels a day, compared with capacity of 3.2 million, Petroleum Minister of State Odein Ajumogobia said last week. The violence threatens to reduce crude exports and increase prices that rose about 38 percent this year to $61.64 a barrel in New York.
MEND said it damaged two pipelines linking Chevron Corp.’s Escravos terminal to domestic refineries and power stations. Its threat this week to block ships carrying oil exports helped push crude prices above $60 a barrel, the highest level in six months.
Oil output from Nigeria fell as low as 1.2 million barrels a day in the past month, Ajumogobia said by telephone from Abuja. Royal Dutch Shell Plc’s onshore fields are the worst affected, he said. It used its so-called force majeure clause to miss contracted deliveries of about 52,000 barrels of crude.
The insecurity situation would ultimately translate closing of more oil and gas operations and subsequently to reduced revenue for the companies and the country. Others that depend on the oil and gas industry may also have to contend with loss of revenue. These include contractors, suppliers and so on. Recruitment of new workers are bound to be suspended till the security situation improves.
Another outcome is that the current unrest has already started to fuel oil prices in the international market. Since Nigeria has remained a net importer of petroleum products, the increased oil price will eventually returned to Nigerians in the form of high pump price at petrol stations.
Future Consequence
The current events would likely play out in many ways. One possibility is that the military operations may succeed. If this happens, then the security situation would eventually easy off and business of oil and gas production would thrive again.
The loss of revenue due to oil theft, known locally as bunkering, would stop. The loss is estimated to be between 100, 000 barrels per day and 600,000 barrels per day. Another possibility would be that JTF may fail in what it sets out to achieve. If this happens, then the situation would be worse and more complicated than what we have today. The militants would be emboldened and would do a lot more of the fight they are prosecuting now.
What would make the situation messier should the JTF fail would be the sympathy of the people that the militants would inherit. The people who are battered and rendered homeless by the JTF offensive would have a reason to back the militants and may even supply new recruits to their cause.
But the ultimate loser in the final analysis, should the JTF fail would be the oil and gas industry. The militants would pummel it so badly that the oil and gas industry as it is known today would be badly damaged.
The economy of the country that depends heavily on the oil industry would be more damaged.
Introduction
THE crisis in the Niger delta region took a frightening turn last week. It was horrific especially for thousands of residents of the Gbaramatu Kingdom and environs, in the Warri South West local government of Delta State, hosts to Camp 5 base of some militants in the Niger Delta region.
Apparently on orders from the federal government, the JTF operatives moved against the suspected hideouts of the militants to finally flush out the rampaging armed youths who have supposedly become a terror in the land.
But in the process of the undeclared war, innocent residents especially women and children were caught in the crossfire. In the displacement, many became refugees in their homeland, exposed to the inclement weather and without the basic necessities of life.
Nigerians woke up Monday morning to be confronted with the pitiful sight of displaced and distraught citizens who were mere victims of a show of brute force by soldiers against the armed groups who claim to be fighting for the emancipation of the region from the shackles of successive governments that have failed to consider the plight of their people whose lands provide the wealth of the nation.
That business and commerce will slow down in the area is to underscore the impact of a crisis of that magnitude on an area. It’s enough to drive away investors from the state. Rivers State, also noted for militants’ activities, is a perfect example of how not to lift militancy to a high pedestal in the life of a people. Most investors have run away and are now being lured back.
Another weighty point to consider is the effect of all these on the upstream sector of the oil industry and by extension, the country’s exports of crude.
Heightened Insecurity and Loss of revenue
Whatever may later be the outcome of the military offensive, the immediate fallout would be an increase in the level of insecurity in the area. The activities of the militants have already battered the security situation with oil companies closing parts of their operations in force majeure.
In the week leading to the JTF attack, the Movement for the Emancipation of Niger Delta (MEND) cautioned those in the oil industry to steer clear of all oil facilities in the region because of the “Oil War” it has declared against the federal government for allowing its troops to bomb its base at Elem-Tombia. It further warned: “A word is enough for the wise. MEND reiterates its previous warnings to all oil workers in the entire Niger Delta region to evacuate from oil facilities and halt production with immediate effect or they will have themselves to blame.”
International vessels were also warned not to come in to load crude oil. Owners of such vessels were cautioned “not to be stupid to disregard the warning because the vessels will suffer the same fate like the Alakiri flow station”. They said hostages will not be taken and should not be deceived that the Nigerian military can protect them.
According to industry sources, Nigeria’s oil production has fallen to less than half its capacity as fighting escalates.
The country now pumps about 1.6 million barrels a day, compared with capacity of 3.2 million, Petroleum Minister of State Odein Ajumogobia said last week. The violence threatens to reduce crude exports and increase prices that rose about 38 percent this year to $61.64 a barrel in New York.
MEND said it damaged two pipelines linking Chevron Corp.’s Escravos terminal to domestic refineries and power stations. Its threat this week to block ships carrying oil exports helped push crude prices above $60 a barrel, the highest level in six months.
Oil output from Nigeria fell as low as 1.2 million barrels a day in the past month, Ajumogobia said by telephone from Abuja. Royal Dutch Shell Plc’s onshore fields are the worst affected, he said. It used its so-called force majeure clause to miss contracted deliveries of about 52,000 barrels of crude.
The insecurity situation would ultimately translate closing of more oil and gas operations and subsequently to reduced revenue for the companies and the country. Others that depend on the oil and gas industry may also have to contend with loss of revenue. These include contractors, suppliers and so on. Recruitment of new workers are bound to be suspended till the security situation improves.
Another outcome is that the current unrest has already started to fuel oil prices in the international market. Since Nigeria has remained a net importer of petroleum products, the increased oil price will eventually returned to Nigerians in the form of high pump price at petrol stations.
Future Consequence
The current events would likely play out in many ways. One possibility is that the military operations may succeed. If this happens, then the security situation would eventually easy off and business of oil and gas production would thrive again.
The loss of revenue due to oil theft, known locally as bunkering, would stop. The loss is estimated to be between 100, 000 barrels per day and 600,000 barrels per day. Another possibility would be that JTF may fail in what it sets out to achieve. If this happens, then the situation would be worse and more complicated than what we have today. The militants would be emboldened and would do a lot more of the fight they are prosecuting now.
What would make the situation messier should the JTF fail would be the sympathy of the people that the militants would inherit. The people who are battered and rendered homeless by the JTF offensive would have a reason to back the militants and may even supply new recruits to their cause.
But the ultimate loser in the final analysis, should the JTF fail would be the oil and gas industry. The militants would pummel it so badly that the oil and gas industry as it is known today would be badly damaged.
The economy of the country that depends heavily on the oil industry would be more damaged.
