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.

Nigeria on the MEND?

A top southern militant in Nigeria has declared this week they will halt attacks on the country’s oil installations to give the new government a chance to deal with the region's problems. Mujahid Dokubo-Asari, leader of the Niger Delta People's Volunteer Force (NDPVF) was freed last week after 18 months in prison on treason-related charges after telling a reporter he would work for the break up of Nigeria. The NDPVF are the second largest rebel group in the area but they are in coalition with the largest, MEND (Movement for the Emancipation of the Niger Delta) so Dokubo-Asari’s words are likely to have force.

MEND and NDPVF operate in the oil rich Niger Delta. Nigeria has relied on oil exports since independence in 1960. Since then, the Delta terrain has been destroyed by deliberate over-exploitation with no concern for sustainable environmental management. Corrupt governments have allowed oil companies drill 4,000 oil wells so far in the Delta and offshore since 1957. These are complete with drilling wastes, drill cuttings, oil sludge and various toxic hazardous chemicals.

Local opposition was led by activists such as Ken Saro-Wiwa. Saro-Wiwa led a non-violent movement for social and ecological justice in the Ogoni region against the government and oil companies. He and eight other activists were executed by the brutal Sani Abacha regime in 1995 after a rigged show trial. Since civilian government was restored in the late 1990s, MEND and the other groups have increased their activities to end the pollution and return some of the oil wealth to the delta.

While little is known about MEND, they have shown an ability to destabilise Nigeria’s oil industry. They are well supported in the local area. In 2006 they managed to reduce Nigeria’s oil output by 25 per cent through a wave of attacks on oil installations and kidnapping of foreign oil workers as well as car bombs in the regional capital Port Harcourt. That bomb represented a change of strategy as most previous operations occurred in the rivers and creeks of the Niger Delta.

The ultimate goal of MEND is to expel foreign oil and non-indigenous people from the region. They support the rights of the local ethnic Ijaw people. While Nigeria and foreign companies has reaped great profits from the oil industry, most people in the region live in poverty, neglected by the government. There are few major roads in the area and fewer hospitals. As a result over 120 different groups, of which MEND are the largest, have risen up claiming to represent the people. MEND has joined forces with Dokubo-Asari’s NDPVF, the Coalition for Militant Action in the Niger Delta, and the Martyrs Brigade to form the strongest anti-foreign oil alliance in the region.

MEND have evolved from their original crude tactics of kidnappings to targeted attacks allied with a carefully co-ordinated public relations campaign. They have invited foreign media into their operations to tell their side of the story. Their military leader Major-General Godswill Tamuno told the BBC in 2006 his group had declared "total war" on all foreign oil interests. They launched a campaign called “"dark February" which involved blowing up two oil pipelines, holding foreign oil workers hostage and sabotaging two major oilfields.

MEND’s apparent invulnerability severely embarrassed Former Nigerian President Olusegun Obasanjo and the groups also rejected his "Marshall Plan" aid proposal in 2006. But things may be changing in the wake of Obasanjo’s departure from office. Obasanjo’s handpicked successor Umaru Yar'Adua was controversially elected President in April 2007 and took office on 29 May.

Three days later MEND announced a ceasefire for the month of the June and released six foreign oil workers held captive for four weeks. MEND said the move signified its "preparedness to dialogue with a willing government." Yar'adua has also been praised for the release of Dokubo-Asari which was one of the pre-conditions for dialogue. MEND said it hoped the new administration would "ruminate on positive and realistic measures towards a just peace in the Delta”.