WHY OIL COSTS MORE: CASE STUDY – NIGERIA

Why? Because the easy oil is all gone and oil in corrupt, violent places where graft and theft are the norm cannot help but add to production costs. Third in a series of case studies on WHY OIL COSTS MORE:
Part 1: KAZAKHSTAN
and
Part 2: SAUDI ARABIA.

Nigeria losing $14 billion a year in oil
Carmen Gentile, August 30, 2007 (UPI)

WHO
- Nigerian President Umaru Yar’Adua; Stephen Hayes, president, Corporate Council on Africa; Stratfor analysts; Movement for the Survival of the Ogoni People (MOSOP), a Nigerian rights group;

The Port Harcourt/Niger Delta region: a network of pipelines, rife with misery and grief.

WHAT
The Niger Delta region of Nigeria is an inhospitable place for oil exploration and production. Foreign oil workers are not safe. Oil is subject to theft, infrastructure is vulnerable to sabotage and government corruption is the norm.

WHEN
- Nigeria has derived an estimated $300 billion since oil production began in the 1970s yet it remains impoverished, without potable water supplies, electricity or other public services and its population remains unhealthy, uneducated and unemployed.
- Circumstances seem to get worse with each passing year of resource “development.” It has become especially problematic since 2005.

WHERE
- Most of the problems center around the oil regions of the delta where the Niger River meets the Atlantic coast at the port city of Port Harcourt.
- Abuja is Nigeria’s capital.

WHY
- Nigeria loses an estimated $14 million/year to oil theft. (Stealing oil from wellheads and pipelines is known by terrorist and criminal gangs in the Niger Delta as “bunkering.”)
- Worse losses may be to corrupt government officials.
- 2005 oil production was estimated at 2.5 million barrels/day (bpd) and 2007 production is estimated to be off by 20 to 33%.
- MOSOP recently praised President Yar’Adua’s efforts to make good on his campaign pledges and deal with the troubles. MOSOP insists more economic justice in oil revenue distribution is desperately needed.

Bunkering in the Niger Delta.

QUOTES
- Hayes: "If you are losing 600,000 barrels a day on oil at $70 a barrel, you are losing $12 million a day on oil theft…”
- Stratfor: “The situation in Port Harcourt will remain unstable in the short term until Nigerian authorities can regain some level of control…Many companies with oil operations in the Niger Delta are based out of or supported by companies in Port Harcourt…These companies and their personnel have not been specifically targeted…there is always the chance that they or their personnel will get caught up in the violence.”
- MOSOP: "It is thus our view that for President Yar'Adua's crusade for transparency, accountability and good governance to be effective in the Niger Delta, the Federal Government must match its words with action by increasing its interest in the operations of the state and local government administrations in the region…”
- Mark Schroeder, Stratfor: “Yar’Adua is throwing around a lot of political capital these days trying to bring the situation in the delta under control…"