Nigeria's oil issues causing worldwide ripples

An oil workers’ strike in Nigeria could push record oil prices up another five dollars a barrel by the end of the week. President of Massachusetts-based Strategic Energy & Economic Research Michael Lynch made the prediction to Bloomberg after crude oil rose to a record $119.93 a barrel overnight. A strike at Exxon Mobil’s Nigerian workers and a series of pipeline bombings has seen that country’s output by 50 percent in recent days. “As long as there are disruptions of high-quality crude supplies, prices are going to move higher," said Lynch. “If the Nigerian strike isn't settled, we could easily see oil rise to $125 by the end of the week.”

However, AllAfrica.com reported today that there were “strong indications” the strike could be called off today. Acting Group Managing Director of the Nigerian National Petroleum Corporation, NNPC, Alhaji Abubakar Lawal Yar'Adua has stepped into the dispute. Yar’Adua called to the workers’ patriotism in the world’s eighth largest oil producing country. He told the strikers that the industrial action was not in the interest of the nation and asked them to resolve the issues through dialogue.

That dialogue is continuing with the oil company, Exxon Mobil. Company spokesman Adeyemi Fakayejo said representatives met workers yesterday. He said negotiations were aimed at ending the walkout by white-collar workers seeking better pay and benefits. Fakayejo would not speculate on how much oil production Exxon Mobil (Nigeria’s second largest operator) had lost in the strike however analysts have estimated they have shut nearly all of its Nigerian oil production, totalling around 770,000 barrels per day.

Even if the strike is resolved, Nigeria may not easily get back to its full capacity of pumping crude. The country is significantly down on its 2006 capacity of 2.5 million barrels a day due to a series of pipeline bombings that show no signs of easing up. Niger delta rebels said their 24 April attack had shut down 350,000 barrels per day of production by Royal Dutch Shell while a previous bombing raid had hit 169,000 bpd of Shell's Nigerian output.

The rebels’ activity has turned the Niger Delta into a high risk area for Western oil companies and their staff. Kidnapping is common and workers are ferried from their electric-fenced compounds in convoys of minibuses protected by armed paramilitary escorts. Expatriates are living as virtual wealthy prisoners too afraid to leave their compounds with restaurants and bars off-limits. A western contractor in the Delta’s main city Port Harcourt said things were going from very bad to very much worse. “When we're not at work, we're on lockdown,” he said.

The harassing of contractors and the string of pipeline attacks are the work of MEND - the Movement for the Emancipation of the Niger Delta. MEND are the largest of several local opposition groups that have protested since the 1960s against the deliberate exploitation of the delta region by corrupt central governments with no concern for sustainable environmental management. Their ultimate goal is to expel foreign oil companies and non-indigenous people from the region and they have operated with seeming impunity from the Nigerian army since 2006 when they declared “total war” on all foreign oil interests.

Their latest campaign has forced Nigeria’s largest operator Shell to shut down a total of half a million barrels of oil a day. In a statement they released to the Nigerian press yesterday, MEND claimed Shell was concealing the true extent of the problem on the orders of the government “to avoid panic and embarrassment.” Analysts believe MEND’s campaign is aimed at stepping up pressure on the government to end the secret treason trial of the movement’s leader, Henry Okah.

Okah was arrested last year for trying to illegally buy weapons in Angola. He was also accused of trying to engineer a coup in Equatorial Guinea. Despite an Angolan court throwing out his charges after five months imprisonment, it is believed Okah was secretly extradited to Nigeria in February this year. MEND then called on the Nigerian Bar Association and the International Community to intervene and compel the government to release him. When this call was ignored, MEND stepped up the pressure with its ominously titled Operation Cyclone aimed at crippling Nigerian oil exports. While Nigeria is in the eye of this cyclone, the outlook remains stormy for oil prices in the rest of the world.