After months of relative calm in the creeks of the Niger Delta, the Movement for the Emancipation of the Niger Delta (MEND) opted to recommence its offensive with a bang. As such, on October 1st, 2010, MEND set off two car bombs during Nigeria's 50th independence celebrations. Since then, the militant group has attacked various pipelines and continued on a violent quest to interrupt oil production, Nigeria's main source of income. But, recent events by certain oil majors begs the question of whether MEND is beginning to have it's intended effect of making Nigeria an unpalatable location for foreign companies seeking to make money from the country's sweet crude.
DELTA VIOLENCE LED TO AN AMNESTY IN 2009
In the first quarter of 2009, Nigeria's oil revenue was cut in half. Government officials even revealed that the country was losing an average of 1 million barrels a day to militant attacks. The country even lost it's long-held position as the 'King of African Crude' to Angola. In no time, the then-Yar'Adua administration sent military forces into the Delta region to weed out militants in an 'oil war' that left many civilians reportedly dead. The end result was that the government extended an amnesty deal to fighters. By September 2009, it appeared that the amnesty was beginning to pay off as oil production and output increased, previously destroyed pipelines were fixed and MEND maintained a ceasefire.
ATTACKS ON OIL FACILITIES INCREASE
Unfortunately, after the October 1st, 2010 bombings in Abuja, MEND has been on a crusade to let Nigerians and the world know that they intend to make the country unsafe. The Italian company Agip, which had seen it's production drop significantly as a result of illegal bunkering of its tampered pipelines, saw its pipelines further attacked in October. Two Agip pipelines in Bayelsa State exploded as a result of incendiary devices. There were also attempts to tamper with pipelines belonging to the Nigerian National Petroleum Corporation (NNPC). 17 individuals allegedly tried to burn the pipelines but were thwarted by security forces who interrupted them and thwarted a potential attack. Yet, Nigeria's minister of Petroleum, Diezani Alison-Madueke assured investors of calm in the Niger Delta in October 2010.
OIL MAJORS DIVESTING FROM NIGERIA?
And with such insecurity, Shell, an oil major that has been the largest oil operator in Nigeria, is beginning to divest itself of certain oil blocks. While the company has not definitely announced a withdrawal from the country, it continues to sell off its oil interests. Shell has repeatedly denied that it's sales as a reaction to militant attacks on its operations but the fact remains that it is selling its oil fields. In addition to seeking local Nigerian oil companies to sell to, the company is also in talks with Russian-owned Gazprom which is considering entering the Nigerian oil sector. Unlike Shell, however, British Gas has announced that it will exit Nigeria. The company, which invested over $500 million since 2004, will end its Nigeria-operations in March 2011. Total and Agip are also set to sell their stakes in certain oil fields.
THE REAL STORY IS YET TO BE TOLD
The exit of British Gas, despite its investments in the country, can be interpreted as a signal that Nigeria's oil sector is not as attractive as it used to be. Companies like Exxon Mobil have found large gas reserves on the country's coast, and the possibility of new oil finds remain strong. That coupled with the fact that countries like Angola and Sudan are known to be more secure for oil interests could be contributing to the divestments. Nevertheless, companies continue to seek an opportunity to enter the oil game, especially the Chinese which will build three refineries in Bayelsa, Lagos and Kogi states. The China National Petroleum Corporation (CNPC) also has oil blocks. India and Taiwan have equally acquired control of oil blocks as well. Additionally, Nigeria's crude exports have been steadily increasing during 2010 and are expected to increase in the month of December. These examples highlight that despite the insecurity in the sector, certain foreign investors believe that the Nigerian oil sector, and it's potential profits, are worth the risk. This despite the fact that MEND announced that it will target South African interests in the country and that there is the possibility that other foreign companies could be targeted.
Clearly, as MEND continues to attack oil interests, certain companies are reducing their presence in Nigeria's oil sector. While that can arguably impact oil production and thus everything in Nigeria, other companies continue to come to Nigeria for the promise of black gold. Nevertheless, it remains obvious that the amnesty is not going to be a fool-proof method of bringing an end to the violence in the Niger Delta. A genuine approach to addressing the concerns of the region's residents and indeed, the concerns and needs of all Nigerian citizens will go a long way in proving that the government will tackle inequalities. Until that day comes, Nigeria may continue to witness attacks on pipelines which not only hamper oil production and profits, but also directly impact the nation's ability to generate electricity and badly needed development.
From the Archives:
- Nigeria's Oil Revenue Cut In Half
- Nigeria's Oil Expiration Date Draws Near
- Nigeria's Oil War - A Distraction?
- No Longer King of African Crude?