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Julianne Geiger

Julianne Geiger

Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.

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Nigerian Oil Anxieties Mount, Even With OPEC Exemption

OPEC may have given Nigeria a pass on the output cuts expected to be divvied out officially at the close of November, but it’s D-Day for the militancy that has so far decimated the country’s oil production by half and taken some 2.2 million barrels of oil per day out of play.

There has been a slight reprieve in Nigeria since the main militant group there—the Niger Delta Avengers (NDA)—agreed to a ceasefire, leaving the playing field to smaller, unrelated groups who have continued to pick only at state-run pipelines to keep the militancy alive.

Right now, all eyes are on Shell’s Forcados export pipeline, which is due to resume exports after attacks forced it to shut down in February. And by all eyes, we mean all—including militant. The focus on Forcados is precisely because companies are once again—and rather suddenly—purchasing Forcados crude, with a line-up including Royal Dutch Shell, which is buying up 1 million barrels for delivery to refineries between 20 and 25 November, according to Bloomberg.

Forcados was one of the first major attacks launched by the NDA, and it gave us our first glimpse of the group’s capabilities: This is a major underwater pipeline feeding the Forcados crude export terminal, and it required diving expertise to execute.

Then there was a ceasefire, which was declared in August, but it is a fragile one indeed. On 24 September, in the middle of the ceasefire, the NDA carried out what they called a “warning attack” on a major pipeline feeding Shell’s Bonny export terminal. The NDA said that the government was dragging its feet in starting constructive dialogue. Shell Nigeria’s Bonny crude exports are now on thin ice, and everyone’s waiting to see if they’ll have to declare force majeure on this as well.

Adding to the Nigerian oil unknowns, a crucial meeting between the Niger Delta stakeholders and the government, which was scheduled for 25 September in Abuja, was cancelled after a line-up of prominent delegates from then region declined to attend.

The government’s practice of deploying troops while claiming to seek constructive dialogue has been received with skepticism by the militants, and anger is boiling over as a result of the death of the father of Government Tompolo, one of the two leaders of the 2005-2009 Niger Delta militant coalition (MEND).

Now, Oilprice.com sources on the ground in the Niger Delta say they are concerned about rumors that some groups are planning to hit the Forcados export pipeline soon. The Nigerian military is likely to respond with an iron fist, targeting nearby communities—an act that will further escalate the tit-for-tat violence.

As for the relaunch of Forcados deliveries (in terms of purchases already made), they will coincide with the end of the rainy season in the Delta—a timeframe that the NDA has suggested would be a prime time for relaunching attacks in full force should the government fail to meet its demands.

Not All Militants are Equal

Aside from the “warning attacks” on Bonny crude on September 25, the most recent bombings in the Niger Delta were perpetrated by groups other than the NDA. The bombings of state-run pipelines have been orchestrated by a newer group called the Niger Delta Greenland Justice Mandate. This group is not connected in any way to the NDA, and it is bent on continuing the attacks even with the NDA ceasefire. Related: 1.5 Trillion Barrels Of Recoverable U.S. Oil Waiting To Be Tapped

The Niger Delta Greenland Justice Mandate is drawn from the Urhobo ethnic group, which is significant because the majority of Niger Delta militants (including the NDA) are drawn from the majority Ijaw ethnic group. The Urhobo do not have the same local support base that the NDA and other Ijaw groups have.

The Greenland group is specifically targeting NPDC (the state-owned oil grouping) installations because these are the only installations in the area where the Greenland group operates. Shell was previously in this area, but sold off its assets here. Today, there are no major oil operations in this specific area.

NPDC is the oil exploration unit of the state oil company, NNPC. By hitting it, they're directly hitting the government. There is likely no imminent threat to the international oil majors from this group due to tribal nuances and geography.

This means that the recent attacks are not nearly as significant to Nigeria’s oil production picture as those perpetrated by the NDA. The NDA seems to be maintaining its ceasefire, at least for the most part, and only time will tell what November will bring.

What the NDA Wants

The demands of the NDA—not to be confused with the other, smaller and less consequential militant groups popping up in the Delta—is simple: More power for the region to control their natural resources. And specifically, they also want the return of a maritime university that was sidelined (and founded by Tompolo), and they want the charges against Tombolo dropped.

The problem for the government is that it can’t really go in and clear out the militants without destroying entire communities and starting an all-out war, from which there will be no return, putting even more oil in jeopardy.

The impact of pipeline sabotage has been devastating for onshore oil operations. Shell, which has sold most of its onshore fields in the past decade to escape the unrest, is considering giving up altogether on land operations in Nigeria to focus on offshore production, with little hope of any substantial respite from the attacks, according to senior company officials. Shell was particularly guided in this decision by the performance of its Obigbo oil field, just outside Port Harcourt. From an average of 100,000 barrels per day output has dropped to 10,000 barrels, with the time of return to full production uncertain, according to an Oilprice source close to the matter.

The NDA’s Clinical Approach: What Next?

The NDA has declared its sole objective to cripple Nigeria’s oil production and bring it to zero, and it purportedly intends to achieve this without killing a single soldier or kidnapping any oil workers.

And what little peace, if any, prevailed after NDA’s “warning” bombing on September 25, it is now out the window, what with the Nigerian Air Force’s airstrikes that targeted oil refineries and barges in the Delta and Rivers State on Monday—an act that the NDA had warned against earlier in September, and an act that is sure to spark further unrest. Related: Can Microwave Technology Compete With Fracking?

A multitude of other groups acting outside the influence of the NDA will also continue to be separate from—and a threat to—any ceasefire agreement, whether or not the government or NDA decide to uphold their end of the bargain. This is particularly the case with groups that don’t belong to the NDA’s Ijaw ethnic group, such as the Niger Delta Greenland Justice group and the Bakassi Liberation Front, active near the Cameroon border, and any number of the armed groups active in the Ahoada-Omoku-Elele axis near Port Harcourt. These smaller groups were all created by politicians who armed and used them as thugs during the last elections, and are now trying to use these politicians to kidnap for ransom to fill their war chests.

Tensions are running increasingly high in Warri Southwest, after Tompolo’s father died the week before last, not having recovered from the aftermath of the military invasion that saw his leg amputated from a severe beating.

If the militants legitimately wanted to give the Buhari government the benefit of doubt to see if dialogue could work, the “warning attacks” would suggest that their patience has run thin.

Deep distrust runs throughout the Niger Delta for Nigeria’s government, which is now led by a Muslim northerner, after a long succession of rulers from the north presided over the allocation of oil fields for decades to the detriment of the delta’s ethnic minorities. Buhari’s perception in the Delta as a pro-north leader only interested in furthering the interests of northern Muslims has aggravated this view of the regime in the mainly Christian region.

We haven’t seen the last of the militants yet, and the OPEC deal can rest assured that even as Libya starts pumping for exports furiously to catch up, militants will continue to hold Nigeria’s output hostage for the foreseeable future.

By Julianne Geiger for Oilprice.com

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