Update on Nigeria As I write, two out of four Nigerian National Petroleum Corporation (NNPC) refineries in Nigeria have been shut down, following bombing attacks on pipelines in mid January. The pipeline sabotage happened in the Niger Delta, in the south of the country, and is costing US$2.4 million/d in lost gas and electricity. The refineries, situated in the southern city of Port Harcourt and the northern city of Kaduna, have been forced to close due to lack of crude supply. Pipeline attacks are nothing new in Nigeria, but these latest attacks mark a massive shift in security of supply.
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A 2009 amnesty dramatically reduced a long spate of attacks on oil infrastructure in the Delta (not to mention kidnappings). Brokered by President Umaru Yar’Adua, the terms of the amnesty granted some 30 000 ex-militants monthly subsidies of 65 000 naira (US$326) and offered job employment and training opportunities.
Nigeria has a new President, Muhammadu Buhair, who came to power in March 2015, beating incumbent President Goodluck Jonathan. The new President has been quoted as saying he will end the amnesty programme (although it will run for at least another year, as planned). His stance on militants is much tougher than the previous administration. Since appointing himself Minister of Petroleum last November, Buhair has ordered that the military take over protection of oil pipelines in the nation, which has had the effect of taking security contracts from ex-militants. The Director of Defence Information has promised that the military will be deploying high-tech security networks to protect pipeline assets from vandals.
The pipeline attacks came after the Nigerian court issued an arrest warrant for Government Ekpemupolo (know locally as Tompolo), who once played a prominent part in the Movement for the Emancipation of the Niger Delta (MEND). The court charges him with theft and money laundering totalling hundreds of millions of dollars. Commentators have suggested that the attacks on pipelines were retaliation against this call for arrest and a warning against further action that would disenfranchise ex-militants. The now-apparent vulnerability of the pipeline assets might suggest to the new President that it is better to work with ex-militants than against them.
MEND has denied carrying out the attacks.
In related news, the Nigeria Extractive Industries Transparency Initiative (NEITI) has announced that it is intensifying efforts to push for accurate metering facilities at production and export terminals in Nigeria. The organisation claims that the royalties paid to IOCs are based on inaccurate flow computations and that their moves to increase transparency in the process have been met with resistance from the purchasing oil companies.Acting Secretary of NEITI Ogbonnaya Orji is keen to erase irregularities in the way crude is measured at payment point and states that the country has until the end of February to submit a completed NEITI audit report.Elsewhere, Royal Dutch Shell has been criticised for taking advantage of a huge tax break in Nigeria, after details emerged that it received billions of dollars in concessions between 2004 and 2012. This was on top of the standard five year tax advantage that all companies enjoy when they commence trading in Nigeria.
An ActionAid report claims that a consortium comprising Shell, Total and Eni received total benefits of US$3.3 billion, with Shell pocketing a US$1.7 billion share of the tax break. Shell and the Nigeria NLG consortium broke no laws, but many have suggested that the taxes could have been used to fund critical services in Nigeria.
There is a silver lining for Nigeria at the moment. The country is benefiting from the decline in oil prices: the low price of crude means that petrol subsidies are no longer in place, meaning a saving of US$5 billion.