Jul 21, 2016

Tolulope Aderemi - The Niger Delta Crisis: Negotiations Vs. Military Force

Over the years, various agitations have filled the political space on the ‘emancipation of the Niger- Deltans’; rightly so. The environmental degradation frequently occasioned by the oil & gas exploration and production activities in the Delta region has largely birthed this agitation as well as various Groups making different claims; some to ownership of oil and gas whilst others to, a need to be compensated for ‘taking their natural resource’. Some others have advocated the need for government to, appropriately interpret the laws and enlighten the populace on the state of the true ownership of the ‘black gold’. Only recently, a former Senator of the Federal Republic of Nigeria (and a former Minister too) on one of the private television stations, advocated for complete secession of the oil blocs to the ‘Niger Deltans’ with government only maintaining a ‘participating’ right. Suffice to say that all views may be right or wrong. What is important is the consequence of not taking prompt, strategic and decisive action on the incessant and alarming damage done by the militants to our oil infrastructure thereby causing Nigeria as a whole to lose its market share in the global oil space.

 The Niger Delta Militants (the category of which includes the Niger Delta Avengers in particular) started attacking oil pipelines sometimes in February, 2016. The reactionary bombings were allegedly not unconnected with the termination of commercial contracts (for the protection of pipelines) to the militants, the discontinuance of the amnesty program put in place by former President Goodluck Ebele Jonathan as well as a reduction in the stipends paid to the militants. It will be recalled that a similar situation was averted by former President Umaru Musa Yar’Adua, who, sometimes in 2006 and 2009 provided monthly stipends to militants who were willing to disarm and maintain peace under an amnesty program. This, as adjudged by many, relatively stabilized the Nigerian oil sector.

 This paper is not to chronicle the ‘Whys’ of the Niger Delta agitations but to consider the commercial consequence of the serial bombings which has hitherto shapened both the micro and macro Nigeria oil space. Nigeria’s Ministern of State for Petroleum, Dr. Ibe Kachikwu (and the immediate past Group Managing Director of NNPC) must be commended for clinically and strategically shoring our daily output from 1.3mbp to about 1.9mbpd. Nevertheless, his successor, Dr Maikanti Baru, must grapple this situation with equal diplomatic and aggressive vigor to avoid situations resulting into a sequence of missed/delayed shipments at the various export terminals in the region; particularly, the Royal Dutch Shell Plc’s Forcados and Bonny export terminals, Eni SpA’s Brass River, the Escravos terminal and Exxon Mobil Corp.’s Qua Iboe terminal.  These events have also led to a declaration of force majeure by Royal Dutch Shell, Nigeria on exports of Bonny Light crude oil, which was only lifted at on Thursday, July 7, 2016.

 Counting Nigeria’s losses:
According to NNPC’s Monthly Financial and Operations Report (Report) for March 2016, Nigeria produced a total of 59.27 million barrels of crude oil in February 2016 (i.e., an average of 2.04 million barrels daily) which is lower than the 66.49 million barrels produced in January of the same year. This represents a 10.85% decrease when compared to the level of production in January. In addition, NNPC states in the April Report, that the oil production level for the month of March 2016 stood at 57.43 million barrels (i.e., an average of 1.85million barrels daily) which is 3.10% lower than February production levels. This is by far the lowest oil production levels Nigeria has recorded in over 27 years. Quite apart from this, the country has lost about 1,500 MW (megawatts) of power supply due to the damage done to the Forcados pipeline which accounts for about 40-50% (percent) gas production.

 The Nigerian Petroleum Development Company (NPDC) may also record losses in the region of about N20billion monthly as a result of the incessant pipeline vandalism. The country, which formerly maintained the position of Africa’s largest oil producer with a production level of about 2.5 million barrels per day, has lost this position to Angola due to the violent attacks on the pipelines. The estimated growth of the country has also dampened, as the World Bank now projects in its semi-annual Global Economic Prospects that the Nation’s economy will grow by an estimate of 0.8% per cent which is down from the initial 4.6% per cent growth estimate. The reduction of the nation’s oil out-put remains a major factor for the decline in the growth of the nation’s economy. The resultant effect of Nigeria’s poor oil production output has also consequently affected the total monthly crude output of the Organization of the Petroleum Exporting Countries (OPEC); which fell from 32.83 million barrels a day in April to 32.71 million barrels in just one month. 

Damages done to the gas pipelines which belong to the Nigerian Gas Company (NGC) affected the flow of gas to electricity power plants and prevented the flow of crude oil to refineries in Warri and Kaduna. This damage has led to a daily loss of about N79 million barrels of crude oil and that it will cost about N120 million to repair the damaged pipelines before normal power generation can be restored. The Forcados export pipeline operated by Royal Dutch Shell Plc which was attacked in February, 2016 was undergoing serious repairs when it suffered a second attack recently. These disheartening events all impact negatively on our overall oil & gas earnings as a country.

 Force or Negotiation?
Initially, it was reported in some media outfits that the government was reluctant to enter into negotiations with the militants in a bid to curtail the attacks on the pipelines. It is becoming clear now that diplomatic means, as opposed to military tactics, might be the way to resolve the menace wrought by the Niger-Delta militants. This, of course will not take away the true ownership of the natural resource from the Federal government. Rather, more attention needs to be paid to cleaning up the havoc wrecked by E&P activities, youth empowerment in the Delta region, accountability of all relevant State governments for the additional 13% derivation and other peculiar incentives peculiar to the Niger Delta community. These are obvious and realistic methods of curbing the violence from further escalating.

The need to also re-consider the security of the pipelines (by some of the indigenes) also commends itself. Making the indigenes stakeholders in the protection of the pipelines might reduce the spate of incessant bombings of these infrastructures; as the oil pipelines span through rivers and mangroves and run for over 27,027 square-mile under water, making it more difficult for military protection; who in most cases are not as familiar of the areas as the indigenes. The Federal Government must also increase its engagement with the relevant State Governors to devise additional methods (particularly, with the use of smart technology) to reduce infrastructural damage on oil assets.

On a final note and looking into the future, the welfare, environment and youth empowerment of the Niger Delta community must be carefully looked into. The Ministry of the Niger Delta and all other Agencies set up for this purpose must be made more proactive and operational. The Petroleum Industry Bill must also be clear on the benefits of being an indigene of a Littoral State whilst acknowledging that sovereign rights over Nigeria’s oil and gas in situ, unarguably rests in the government. This is very important.

 Tolu Aderemi is a Partner, Energy & Infrastructure of Perchstone & Graeys; a foremost commercial Law Firm in Lagos, Nigeria.

Ed’s Note: This article was originally published here