RCEM: Views on Energy News

The militant group Niger Delta Avengers once again took the arms and destroyed several oil wells and installations located in South of Nigeria, region populated by a large Christian community. 

There is a grim feeling ofdéjà vutaking us back to 2006-2009 when rebels of this region inhabited by some 20 million people revolted against the federal government demanding at least some control over local natural resources.

Previous conflicts in Niger Delta ended seven years ago with a payoff by the government in Abuja, the national capital. Central authorities consented to a comprehensive amnesty for the rebels, launched a job-training vocational programme and employed the yesterday’s ‘militants’ as guardians of the oil infrastructure they used to blast. Actually, it amounted to a monthly ’stipend’ (at that time worth some $400) paid to the fighters to pacify them and buy out peace and tranquillity in the conflicted region.

refinery

However, this year after the nosedived global oil prices siphoned bailout cash from the budget, Nigerian President Muhammadu Buhari, who is also the commander-in-chief, slashed by nearly three-quarters the financing of the regional programmes and cut the legitimized bribes for the local militants used to rent their loyalty. On top of it, the grand project of setting up a new university in the Niger Delta was abandoned too.

Soon after, the deeply rooted sense of resentment in the Christian south toward Mr. Buhari, who happens to be a Muslim, was automatically transformed into extreme forms of defiance. To be fair, it is not only and not essentially about a fair distribution of profits from the hydrocarbon riches. Niger Delta people are infuriated by the demonstrative disinterest of the government in tackling the appalling environmental situation.

Apart from “a half-century legacy of offshore oil spills equivalent to one Exxon Valdez every year”, as Steve Levine wrote back in 2010, there is the scourge of mismanagement by multinational oil companies that have ruined the local mangrove swamp, considered as probably the most precious natural reserve on earth. Eventually, it undermined the delicate saltwater and freshwater balance and inflicted irreparable damage to flora and fauna.

The region was not immune to oil spills as well. Royal Dutch Shell alone pleaded guilty to 1,693 oil spills since 2007. Today, the Niger Delta soil is soaked with this heavy substance. Contamination of soil and water prevents traditional farming and fishing that local population used to rely upon for income and nourishment.

Experts of the United Nations Development Programme assessing the situation in the Niger Delta region have noted in their 2006 report “administrative neglect, crumbling social infrastructure and services, high unemployment, social deprivation, abject poverty, filth and squalor, and endemic conflict.” The federal authorities seemed to neglect these abysmal conditions and viewed the region as a Cinderella, the unloved child that deserves mistreatment.

No wonder, frustration has accumulated and burst out in the most vicious forms of recalcitrant behaviour. The latest attacks on oil infrastructure, wells and pipeline, belonging, in particular, to the US energy major Chevron, have curtailed daily output from 2.2 million b/d at the beginning of the year to something in the interval from 1.6 million b/d to 1.4 million b/d (estimates vary). As a result, Nigeria was dethroned from the number one oil producer in Africa, sliding down to the second place beneath Angola.

The more worrisome element in the renewed round of hostilities in the Nigerian latent civil war is the extreme bellicose stance of what is believed to be the new generation of “avengers”. They refuse to enter negotiations with the government and have pledged to roll back oil production in the country, as they put it, “ to zero.”

It might be a bluff but it might be as well evidence that stakes are upped and that previous compromise struck between the Muslim North and the Christian South was half-baked and non-sustainable.

The crucial issue of an equitable apportioning of oil revenues is still on the agenda. Hammering out and pursuing a coherent multi-faith and multicultural (sorry for using the annoying term) policy in order to balance the interests of the two parts of this artificial nation, stitched together by the British former colonizers, has not been achieved. It is not even in the pipe. It leaves the country in limbo, prone to social unrest, political convulsions and chaos.

If President Buhari fails to come up with a subtler instrument of settling differences in interests and opinions than simply sending troops to the rebellious province, then Nigeria will remain hostage to the so-far inherent instability. It would adversely affect the mood and state of play on the global oil markets. Thomas Pugh, commodities economist at Capital Economics, was quoted by CNN, “output could stay low for years if there is no ceasefire.”

The global repercussions would be far-reaching. Oil exports and revenues have oiled the smooth economic growth of Nigeria long enough. The annual GDP growth averaged 4.12% in the timeframe from 1982 until 2016, making it to the book of records in the fourth quarter of 2004 with an impressive 19.17% hike. Now, things are going from boom to bust. Latest statistics serves nothing but to fuel disillusionment: In the first three months of 2016, GDP lost 0.36% compared to last year. Prospects are dim and grim.

Should the hard-line militants, more commonly referred to as the Movement for the Emancipation of the Niger Delta (MEND), prolong their fight against the federal government to bring it to its knees, Nigeria will spiral downward to clone the fate of Libya, firmly trapped in the dismal state of half-disintegration.

Consequently, systemic disruptions of production wiping out Nigeria’s 2.2 million b/d input would dwindle overall global supply and put upward pressure on prices. Paradoxically, much to the gleeful satisfaction of Saudi Arabia who initially provoked the oil price crunch before finding itself on the receiving end of this policy.

For the record: Nigeria is among the top 10 largest oil producers in the world with 37.2 billion barrels of proven oil reserves (2011 data). Oil and gas sector generate about 35% cent of GDP. Crude and petroleum products exports revenues form more than 90% of total exports revenues. Niger Delta is the main hydrocarbon ‘bread-basket’ for the nation, producing 90% of crude oil and thus providing 70% of all revenues for the federal budget.

George Hatziioannou

RCEM Expert & Editor of EIRA News

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