Delta Crisis: Nigeria Talks to MEND as Avengers Strike Gas Pipeline
The Movement for the Emancipation of the Niger Delta started talks with Nigeria’s government, even as another militant group claimed to have blown up a pipeline in the oil-rich region.
The negotiations “will seek to find solutions to the short, medium and long-term future of the Niger Delta region,” MEND spokesman Jomo Gbomo said Sunday in an e-mailed statement. While Nigeria’s presidency said on July 21 it’s talking to militants, that doesn’t appear to include the Niger Delta Avengers, the rebels claiming responsibility for the attacks on oil infrastructure this year.
♦ MEND talks may be strategy to bring in other groups: Vetiva
♦ Niger Delta Avengers claim to have blown up pipeline on Sunday
The Avengers, who in February shattered a seven-year peace with a campaign of sabotage that’s cut crude output and starved the government of revenue, late Sunday said they blew up a gas pipeline belonging to the Nigerian National Petroleum Corp. The statement on the group’s website couldn’t be verified. The Avengers say they want a greater share of the wealth that oil companies extract from their native lands to be spent on local schools, hospitals and other essential services.
“The Avengers have proved difficult to engage,” Pabina Yinkere, head of research at Vetiva Capital Management Ltd., said by phone from Lagos. “The government has made several attempts to dialogue with the Avengers but we are yet to hear of any successful discussions. The move to dialogue with MEND could be a strategy to bring in the Avengers and other fringe groups.”
The Avengers said it hit a gas pipeline owned by the state-oil company in the Nsit-Ibom area. That follows NNPC’s appeal on July 21 to the Nigerian military to improve security in the delta region.
See how Militants are controlling OPEC’s oil production
Militants patrolling the creeks of the Niger Delta area of Nigeria in 2006.
Oil watchers have been waiting for a production cut for almost two years.
But while OPEC hasn’t yet participated in a coordinated effort, the cartel of oil-producing countries technically has slashed its output.
Or, more accurately, Nigeria, one of its 13 members, has.
“Actually, we did have a de facto OPEC cut. Just — it was by accident,” Helima Croft, the head of commodity strategy at RBC Capital Markets, told Business Insider in an interview on Tuesday.
“Nigeria is that big supply-disruption story — and it can just go on,” she said.
Nigerian oil production has fallen by 31% this year to about 1.4 million barrels a day, down from 2.03 million barrels a day in January. That’s such a huge drop that Angola is now the No. 1 producer in Africa, as its production held steady in April at 1.8 million barrels a day.
Attacks on energy infrastructure by a new militant group called the Niger Delta Avengers have been the main cause of the production outages. Most notably, the group attacked a Chevron offshore facility earlier this month and the underwater Forcados export pipeline operated by Shell in late March.
Croft has since argued that even if Canada comes back from its devastating wildfires, Nigeria has essentially caused a rebalancing in the oil market all by itself.
The Niger Delta Avengers’ rise has roots dating back to the 2000s, when armed militants in Nigeria’s oil-rich Niger Delta, including members of the Movement for the Emancipation of the Niger Delta, routinely kept hundreds of thousands of barrels of oil off the market.
At its peak, MEND slashed Nigeria’s output by half and cost the government $19 million in daily defense outlays, according to previously cited data by the RBC Capital Markets team.
In an effort to curtail the chaos and huge financial losses, the Nigerian government in 2009 signed an amnesty agreement and pledged to provide monthly cash payments and vocational training programs to the nearly 30,000 former militants in exchange for cooperation. Some of the more influential members like the ex-leader Government Ekpemupolo (referred to as Tompolo) also received lucrative security contracts worth nearly $100 million a year.
The arrangement was a pretty good Band-Aid. But it failed to address the fundamental drivers of instability in the region such as poverty, corruption, and the proliferation of weapons.
Fast forward to today: The Buhari administration has cracked down on corruption in the region by axing the expensive security contracts and issuing indictments for theft, fraud, and money laundering.
Even if the government wanted to pay off the militants today, it doesn’t exactly have the money for it, with oil prices still far below their peak and state resources redirected to counterinsurgency operations against Boko Haram.
“When people say the government can just pay them off — with what money?” Croft told Business Insider. “What president is running Nigeria right now? Now, if President Buhari folds to the militants, his whole reason for being in office then evaporates. He ran on a program of fixing Nigeria and ending the cycle of payoffs.”
Given that the Nigerian disruptions are at least partially a product of long-run structural issues, one can argue that they could last for some time. (As opposed to, say, the Canadian wildfires, which, while devastating, are only a temporary headwind.)
“I think we have to look at what happened in the past and say, well, could they potentially shut in production? … No company is going to keep their operations going when people show up with AK-47s,” Croft said. “You just wait it out. You don’t run a risk to your personnel or operations.”
“These are structural problems in these oil-producing states,” she continued. “This not noise. This is not something that you can take your magic wand and make this thing go away.
“So this one, I think, fasten your seat belts. This one’s going to go on.”
Nigerian Militants: Oil Companies Have 2 Weeks To Evacuate Or Else…
Charles Kennedy, Oilprice.com /
The Niger Delta Avengers (NDA), the group behind the string of attacks that have halted major operations in the oil-rich Niger Delta, have issued a threat to all oil companies in the region to shut down and leave or face stepped up attacks.
The ultimatum was issued on Thursday, and signed by spokesman Mudoch Agbinibo.
“The Niger Delta Avengers is giving two weeks ultimatum to all oil companies in our region to shut down and evacuates their staff,” the statement, carried by Nigerian media, allegedly read.
The group said that failure to comply would result in bloody attacks that the Nigerian military would be incapable of stopping.
According to Nigerian media, NDA sent the statement by email, specifically warning: “If at the end of the ultimatum and you’re still operating. We will blow up all the locations. It will be bloody. So, just shut down your operations and leave.”
The group also specifically noted oil blocs that are allegedly owned by former Nigerian vice-president Alhaji Atiku Abubakar, Defense Minister General Theopilus Danjum, for petroleum minister Alhaji Riwalnu Lukman and others.
The group is taking issue with the fact that most of the oil wells in the area are owned by figures outside the Niger Delta, indicating that locally owned or locally connected ownerships will be spared attack.
In the fallout from the latest series of attacks, Royal Dutch Shell has been forced to evacuate staff from its Eja OML 79 production facility.
On Monday, Nigerian officials said that Chevron had begun to evacuate staff from its facilities in the Niger Delta follow attacks on its assets. Several Chevron facilities, such as a platform and oil flow station, were attacked by militants last week.
On Thursday, militants vowed to attack Chevron again as the company attempts to repair damage.
“We made it clear that no repair works should be done until our demands are fully met,” the NDA spokesman was quoted as saying.
And a new militant group calling itself the Niger Delta Avengers has claimed responsibility for the attack, according to the WSJ.
Notably, this attack is not an isolated incident, but rather reflects the deteriorating political and security dynamics posing an immediate threat to Nigeria’s oil output.
Since the government ordered an arrest warrant for members of the Movement for the Emancipation of the Niger Delta (MEND), including the ex-leader Government Ekpemupolo, the country has seen a spike in attacks this year, including one on the Forcados export pipeline operated by Shell. (The Avengers have taken credit for this attack, too, according to reports cited by Bank of America analysts.)
The Niger Delta Avengers reportedly want locals in the Niger Delta to have more control over the oil resources in the region, as well as higher living standards for those living there and the continuation of the Niger Delta amnesty program, according to Bank of America Merrill Lynch’s Oyin Anubi.
(Although, Anubi cited local press reports noting that Ekpemupolo has tried to distance himself from the Niger Delta Avengers, who aren’t part of the existing Niger Delta Amnesty program.)
The Avengers’ agenda seems to parallel the situation back in the 2000s, when armed militant groups, including MEND, routinely kept hundreds of barrels of oil off the market.
At the time, MEND portrayed “itself as political organization that wants a greater share of Nigeria’s oil revenues to go to the impoverished region that sits atop the oil,” according to The Economist.
In 2009, the government signed an amnesty agreement pledging to provide monthly cash payments and vocational training programs to the nearly 30,000 former militants in exchange for cooperation.
But although the arrangement was a pretty good band-aid, it failed to address the fundamental drivers of instability in the region, such as poverty, corruption, and the proliferation of weapons.
Moreover, Nigeria’s current economic slump adds more pressure to the situation, and the current administration under Muhammadu Buhari has vowed to reduce corruption and excessive government spending.
Notably, the recent attacks have taken a toll on oil output in Nigeria. According to data cited by Anubi, oil production is now down to mid-1990s lows, with unplanned supply outages ranging from 200,000 to 300,000 b/d.
And although the country has previously delt with similar threats, Anubi argues that there are three major reasons to be more concerned now than in previous years:
The large-scale attack on an offshore facility — as opposed to an onshore one — shows that the scale of militancy has increased.
The regulation of Nigeria’s oil sector remains a bit unclear as a new bill is intended to split the national oil company into two parts.
The current Nigerian government under Buhari, which aims to reduce corruption and excess expenses in the lower oil environment, is “incompatible with spending large sums of money to appease Niger Delta militants,” writes Anubi.
In short, as RBC Capital Markets’ Helima Croft noted back in late March, “the government appears to be on course for a head on collision with armed militants in the oil region.”
