Nigeria's main rebel group announced recently that it killed four police officers and was considering taking on more hostages in a renewed offensive. With the U.S. State Department issuing a travel warning for Nigeria, and the country's president still coping with Islamic militancy, the oil-rich nation has remained a lingering national security concern. Chevron, meanwhile, just announced that a fire burning at a natural gas rig off the Nigerian coast finally went out, some 45 days after the blaze erupted. Considering the myriad of problems the country faces, it may be only a matter of time before it's not just Iran that global energy traders need to worry about.
The Movement for the Emancipation of the Niger Delta claimed responsibility for killing four policemen on patrol in the oil-rich south of the country. The group is waging a guerrilla campaign in the region because it feels the government isn't distributing its oil wealth fairly. Following a brief amnesty period, the group appears to have ended its truce.
Last week, the U.S. State Department issued a travel advisory for Nigeria, warning of violence in the oil-rich Niger Delta region. This could be interpreted as a substantial statement, given that Nigeria is the No. 5 supplier of crude oil to the United States, a country were gasoline prices may very well be a deciding factor in the November presidential election.
Against the violent backdrop is a January accident reported by U.S. supermajor Chevron. Chevron said equipment failure may have led to the gas explosion off the coast of Nigeria. The fire raged since January and the supermajor only announced Tuesday the fire went out by itself. Chevron said it was offering assistance to local communities affected by the disaster, presumably after Nigerian President Goodluck Jonathan paid a personal visit to the site. Yet two workers were reportedly killed in the January accident and Chevron wasn't able to contain the incident despite its best efforts.
The Nigerian oil sector is beset by pipeline spills. Energy companies blame saboteurs while critics accuse groups like Chevron of neglect. Jonathan has so far managed to keep security issues more or less under control and had visited the site of Chevron's incident to press the supermajor for further action. Energy traders point to geopolitical tensions with Iran as the likely culprit behind the recent spike in oil prices, yet Nigeria lingers in the minds of investors operating in a market where pessimism rules the day. Nigeria ranks 8th among OPEC nations with around 37 billion barrels of proven oil reserves. If there's anything to read in the State Department advisory, it may be that Nigerian crude is the next energy market concern.
By. Daniel J. Graeber of Oilprice.com