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Nigeria's oil industry appears fragile amid attacks


Published: April 24, 2008 at 5:06 PM
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Militant attacks have increased, while production has fallen and global crude prices have spiked.
By CARMEN GENTILE
UPI Energy Correspondent
Violent attacks on oil installations have increased in recent weeks, raising concerns that Nigeria's militants are aiming to make good on a promise to cripple the country's petroleum industry.

Feeling the sting of recent attacks on its installations in the oil-rich Niger Delta, Royal Dutch Shell said Wednesday it might not be able to honor contracts for April and May because of decreased production levels.

The leading foreign oil producer in Nigeria said its output was off by 169,000 barrels per day because of the increased attacks by militant groups.

So far, the Movement for the Emancipation of the Niger Delta has claimed responsibility for at least three attacks on Shell installations including a facility at the Bonny terminal, causing the 169,000 bpd shortfall.

MEND said it was stepping up its attacks because of the arrest of one of its most prominent leaders, who is facing trial by a secret commission on several charges including weapons trafficking and treason.

MEND and other militant groups have been blamed for hundreds of kidnappings since violence in the delta began in 2005. Increased violence against oil operations in the delta has caused significant drops in the country's oil output, according to the Nigerian government and independent accounts. Before stepped-up hostilities by militant and other armed groups in the Niger Delta beginning in late 2005, Nigeria produced about 2.5 million barrels per day. Since then, production has reportedly decreased by at least 20 percent, perhaps even by one-third, warn some analysts.

Since the 1970s, Nigeria, Africa's No. 1 oil producer, has pumped more than $300 billion worth of crude from the southern delta states, according to estimates. High unemployment in the delta, environmental degradation due to oil and gas extraction, and a lack of basic resources such as fresh water and electricity have angered the region's youth, who have taken up arms, many times supplied by political leaders, and formed militant groups and local gangs.

The militants have called for a more equitable distribution of the country's oil wealth.

Hoping to quell the violence, Nigerian President Umaru Yar'Adua reached out to the rebels following his April election asking for them to give his administration time to tackle the problems of the delta. Those proposed reforms include changes to the Nigerian economy, particularly its petroleum sector, which generates up to 95 percent of the country's revenue.

However, since then MEND and other militant groups and gangs have repeatedly pledge to quell the violence only to return to attacking high-valued oil installations, disrupting production in Africa's largest oil producer and contributing to global price increases, according to analysts.

Mark Schroeder, regional director for Sub Saharan Africa at the Stratfor consulting firm, noted that the MEND leader's arrest "seems to have riled his loyalist and contributed to the recent violence" in the delta.

"They've (MEND) always issued their threats (to disrupt oil production), but this time the focus of the attacks are much more specific," Schroeder told United Press International.

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