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Ambushes, Kidnappings, and Dead Cops: Niger Delta Oil Production Hits Historic Low Amid Violence

Multinational oil giants Shell and Chevron have been forced to stall oil production in Nigeria in recent weeks as the uptick in violent attacks on pipelines puts pressure on the country's finances.

by VICE News and Reuters
May 10 2016, 4:36pm

Photo de Akintunde Akinleye/Reuters

Oil workers in Nigeria are calling on companies operating in the country to evacuate their staff from the southern Niger Delta after a recent resurgence in attacks on oil facilities have pushed crude outputs to a historic low in the West African nation.

In the latest bout of violence in the Delta, Gunmen killed four Nigerian policemen in the oil-producing southern Niger Delta on Monday, police said. The officers were ambushed in the Okobie community while traveling to Yenago, the capital of Bayelsa state, police spokesman Ahmad Mohammad said. He said it was unclear who was behind the attack.

Shell workers at Nigeria's Bonga oilfield in the southern Niger Delta were evacuated following a militant threat, a senior labour union official said on Monday, while attacks late last week forced Chevron to shut its Okan offshore facility, taking out 35,000 barrels per day.

Attacks on oil pipelines and kidnappings have been rising in the Delta, which produces much of Nigeria's oil output, since authorities issued an arrest warrant in January for a former militant leader on corruption charges.

Related: Chevron Forced to Close Oil Facility in Nigeria After Attack by 'Avengers' Militant Group

Residents have been long demanding a greater share of oil revenues. Crude oil sales account for around 70 percent of national income in Nigeria but there has not been much development in the poor Delta swampland.

Following the latest developments, Cogent Ojobor, the chairman of the Warri branch of the Nupeng oil labour union, told Reuters that the oil companies should be evacuating their workers.

"Best thing for any reasonable company to do is evacuate its workforce," Ojobor said.

Similarly, Chika Onuegbu, the chairman of the Trade Union in Rivers state in the Delta, said Chevron had evacuated some staff from the Delta, after a similar move from Shell.

"There is high alert around various installation around the Niger Delta due to recent attacks," Onuegbu said. "Those evacuated are where their platforms have been attacked but others are working."

The latest string of attacks in May on Nigeria's oil infrastructure follow similar incidents earlier this year. The violence has reportedly pushed the country's output of crude close to a 22-year low, adding intense pressure on the country's finances, according to data from Reuters.

The violence has depressed production in what is typically Africa's largest crude producer to roughly 1.69 million bpd in May, the lowest since at least June 2007, when production fell to 1.68 million bpd, International Energy Agency (IEA) data shows.

While Shell said the latest unrest had not yet impacted production, its Forcados field, for example, is still closed and under force majeure following a February subsea pipeline attack, taking out 250,000 bpd.

A further small reduction from any field would quickly send output to the next low, seen in August 1994, when it hit 1.46 million bpd, according to the IEA data.

"It's really not a good situation," Eugene Lindell, senior energy analyst with JBC Energy in Vienna, told Reuters. He noted that the global excess of crude was keeping prices from moving significantly higher on the back of the outages. "They have less production, and they're getting less bang for their buck."

Related: Nigeria's Government May Have Just Caught the State-Owned Oil Company Hiding $16 Billion

The country's 2016 budget, signed into law just last week, assumes 2.2 million bpd of oil production at $38 a barrel. In a country analysis released late last week, the US Energy Information Administration noted that pipeline sabotage and oil supply disruptions had increased in 2016, putting direct pressure on the country's finances.

"Because Nigeria heavily depends on oil revenue, its economy is noticeably affected by changes to its oil production and/or to global crude oil prices," the report said.

President Muhammadu Buhari has said there would be a crackdown on "vandals and saboteurs" in the country's oil-producing Delta region, and analysts said the violence could scare investment away from the country.

"If it continues like this... there are companies who will probably not consider Nigeria" for upstream investments, Lindell said.

Buhari has extended a multi-million dollar amnesty signed with militants in 2009 to stop them attacking oil facilities, but upset them by ending generous pipeline protection contracts.

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