Oil eyes this week have been enthralled by the appalling spectacle in Alberta, and distracted by Saudi Arabia’s compelling domestic take on Game of Thrones.
Oil eyes this week have been enthralled by the appalling spectacle in Alberta, and distracted by Saudi Arabia’s compelling domestic take on Game of Thrones.
But while Albertan oil could restart in a couple of weeks, and the Saudi reshuffle leaves nothing more radical — so far — than a new face to present a familiar message, it’s the potential for an escalating Niger delta insurgency that should, if recent history is anything to go by, have more pronounced long-term effects for crude.
A new rebel group, the Niger Delta Avengers (NDA), has picked up the baton once held by the Movement for the Emancipation of the Niger Delta (Mend), which spent years attacking pipelines, refineries, wells and platforms on and offshore.
At the height of its insurgency, Mend managed to shut in as much as 1mn b/d of Nigeria’s crude production. NDA shares its DNA with Mend. Production infrastructure owned or operated by Shell, Chevron and Italy’s Eni are again the main targets. The NDA whips up a fervour with biblical language — last week casting itself as Moses delivering the people — echoing an April 2013 Mend offensive named Hurricane Exodus.
Nigeria’s crude production in April was low, with the outage at Forcados — by all accounts the result of a sophisticated attack — taking some time to repair. And with the Nembe Creek trunk line now damaged, May’s production could be the lowest in almost 22 years. Generally, attacks on pipelines, often for purposes of theft, have been running at twice the rate of 2015, according to NNPC head Emmanuel Ibe Kachikwu. NNPC describes the attacks as “incessant” — its figures show nearly 10 attacks a day on pipelines on average in the 12 months to March.
As demonstrated in Libya, large volumes removed from the market in an insecure environment cast a pall of uncertainty. There is an initial reaction as the outages are factored into short-term supply outlooks, before the missing volumes become almost forgotten – written off as a lost cause. Then the potential for them to return causes more ructions, as does any failure for them to do so.
A cash-fuelled amnesty in August 2009 — after which the Nigerian government flooded the delta with money, training and contracts — lasted around six years. President Muhammadu Buhari extended it by two years, but amended the deal — reducing the number of beneficiaries significantly and refusing to renew many security and pipeline surveillance contracts awarded to former militants — helping to explain the assertiveness of the new rebel group.
When the previous insurgency dissipated, Nigeria found its crude was becoming surplus to requirements in the US. Abuja fears renewed violence just as US appetite for west African crude is returning — imports from the region reached 14.5mn bl in February, the highest monthly total since October 2013, customs data compiled by shipbroker MJLF show.
With public funds under strain from lower oil prices and Buhari’s pricey reform plans, the peace dividends are drying up, leaving the delta vulnerable to a new period of violence and instability.