[A-List] Growing Unrest Posing a Threat to Nigerian Oil

["Yoshie Furuhashi" <critical.montages@xxxxxxxxx>]

"Production Falls from Unrest in Nigeria":
<http://www.nytimes.com/imagepages/2007/04/21/business/worldbusiness/20070421_OIL_GRAPHIC.html>

<http://www.nytimes.com/2007/04/21/business/worldbusiness/21oil.html>
The New York Times
April 21, 2007
Growing Unrest Posing a Threat to Nigerian Oil
By JAD MOUAWAD

PORT HARCOURT, Nigeria — There are few safe places left for oil
companies in the Niger Delta, the epicenter of this country's
petroleum industry.

Armed rebel gangs have blown up pipelines, disabled pumping stations,
and kidnapped over 150 foreign oil workers in the last year. Companies
now confine employees to heavily fortified compounds, allowing them to
travel only by armored car or helicopter.

One company has fitted bathrooms with steel bolts to turn them into
"panic" rooms, if needed. Another has coated the pylons of a giant
oil-production platform 80 miles offshore with waterproof grease to
prevent attackers from climbing the rig.

The violence in the Niger Delta is likely to be one of the thorniest
political problems for Nigeria's new president, to be chosen in the
election April 21. Oil, after all, is the mainstay of Nigeria's
economy, providing 65 percent of its revenue.

The events in Nigeria, the world's eighth-largest oil exporter, have
rippled across energy markets, contributing to higher prices and
tighter supplies.

[On Friday, gunmen attacked a boat carrying oil workers to an offshore
rig in the delta, pushing up oil prices by more than $1.50, to $63.38
a barrel.]

The United States imports more than one million barrels of crude oil
from Nigeria every day.

Many analysts warn that tensions here could derail plans to boost oil
production in this country of 140 million people. Already, a quarter
of Nigeria's oil output has been shut down, costing an estimated $12
billion in lost sales in over the last year. Some foreign operators
have abandoned oil fields, or left the country altogether.

"I can't think of anything worse right now," said Larry Johnson, a
former United States Army officer who was recently hired to toughen
security at a site here operated by Eni, an Italian oil producer.
"Even Angola during the civil war wasn't as bad."

Violence is not new to the Niger Delta, a vast area of 40,000 square
miles of swamps and creeks where the Niger River washes out into the
Atlantic Ocean. The region, which produces most of the country's oil,
is also one of the nation's poorest.

In the 1990s, there were occasional kidnappings. But at the time,
recalled Chris Haynes, a senior Shell executive, "you could usually
get them released for a few bags of rice or a cow."

Since January 2006, however, violence in the delta has surged. So far
in 2007, there have been at least 18 attacks against oil facilities or
bases in the delta, according to Bergen Risk Solutions, a consultancy
based in Bergen, Norway.

And about 70 foreigners have been abducted in 2007, although most have
been released within weeks in exchange for ransoms, typically hundreds
of thousands of dollars. Oil companies find themselves in an uneasy
position, stuck in a crisis that they, in a sense, helped create. For
years, human rights groups accused them of turning a blind eye to the
corruption of Nigeria's successive military regimes while damaging the
environment in the delta.

Some companies have acknowledged these past grievances but say they
changed after Nigeria returned to civilian rule in 1999.

Still, gas flaring into the atmosphere remains a serious problem
despite a government deadline to end the practice by 2008; few expect
that deadline will be met. Also, oil spills continue to spoil the
delta's fragile environment. Energy executives blame locals for
sabotaging their pipelines either to steal the oil or to gain
lucrative cleanup contracts.

By all accounts, petroleum profits have brought huge benefits to this
country's rulers, but few to its people. Oil companies typically keep
7 percent of the profits from oil sales; the government gets 93
percent.

Nigeria ranks as one of the most corrupt countries in the world
according to Transparency International, a Berlin-based
anti-corruption group; 70 percent of the country's population lives on
$1 a day or less. Life expectancy is 47 years.

Between 1960 and 1999, more than $380 billion was stolen or wasted,
according to Nuhu Ribadu, Nigeria's top anti-corruption official. In
that period, the country produced over $400 billion worth of oil.

In an effort to redistribute wealth, the government now gives 13
percent of the proceeds from oil sales to the producing states but
there is little accountability of how these funds are spent. Much of
it simply disappears, wasted by inefficient or corrupt local
officials, according to a recent Human Rights Watch report.

The River States government, for example, had a budget of $1.3 billion
in 2006, the report said. It includes transportation fees of $65,000 a
day for the governor's office; $10 million for catering,
entertainment, gifts and souvenirs; and $38 million for two
helicopters. Health services received $22 million.

"Oil companies are caught in an impossible situation," said Chris
Albin-Lackey, a researcher with Human Rights Watch. "They cannot meet
the expectations of the communities in which they operate. At the same
time, you have a government unwilling to do anything about the delta."

Oil companies have all set up programs to build roads, hospitals or
schools in their communities. Shell, for example, said it spends over
$100 million each year on social and health programs in the Niger
Delta. Exxon, which has set aside $21 million for similar projects in
2007, noted it had built 95 percent of the roads in the town of Eket,
close to one of its operations.

But in the absence of government services, executives say their
programs alone cannot buy them sustained peace.

"The government should really be the one who looks after everybody
else," said Basil Omiyi, Shell's managing director in Nigeria. "I
don't think the capital program of oil and gas companies can be the
government in the Niger Delta."

John Chaplin, Exxon's top executive in Nigeria, said "The demands are
limitless."

Critics say governments in Abuja, the country's modern capital, have
neglected the delta region and blame oil companies for being complicit
in a system that ignores the communities where the oil is produced.

"The situation here is deplorable," said John Owubokiri, an advocate
for the rights of the delta states in Port Harcourt. "The people are
being shortchanged."

That message is now being delivered in a more forceful way than the
largely nonviolent militancy of the past decade. A new group, the
Movement for the Emancipation of the Niger Delta, has emerged in the
past year and claimed responsibility for many of the kidnappings and
attacks against oil companies.

MEND wants more money for the delta states and has vowed to bring
Nigeria's oil exports to a stop if its demands are not met.

"We are more than capable of escalating the violence," the MEND
spokesman, Jomo Gbomo, who regularly sends e-mail messages to the
media, wrote in response to e-mailed questions. The group, he said, is
prepared for "a protracted military confrontation."

The violence has driven some companies away. Willbros, one of the
world's largest independent contractors, left Nigeria last summer
after nearly 45 years, because nine of its employees were held in the
swamps for weeks. After their release, Willbros said the dangers in
Nigeria "exceed our acceptable risk levels."

After one of Shell's big export sites was bombed in February 2006, the
company abandoned its operations in the Western part of the delta and
shut half its production, or 500,000 barrels a day. In early April,
Shell outlined plans to restart production within six months.
Meanwhile, the government has been unable to quell the unrest,
security consultants said. "Nigeria's security forces are ill
equipped, poorly led, unmotivated, and outgunned," said Ian Pilcher,
the head of Nigerian operations for ArmorGroup, a British security
consultant.

But Nigerian officials say they do not want to escalate tensions by
sending more troops to the region.

"It's definitely not a first option," said Edmund Daukoru, Nigeria's
oil minister, referring to a more forceful military response.

The lack of security has created demand for private security firms to
help oil companies make conditions safer for their workers who are
adjusting to a new lifestyle. For example, Triple Canopy, an American
security firm founded shortly after the Iraq invasion, opened its
first office outside of the Middle East in Lagos last summer.

While the attacks against oil companies have slowed recently, replaced
largely by election violence, few analysts believe the militant
movement will disappear soon.

Just a few months ago, foreign employees in Port Harcourt, the center
for oil operations in the delta, lived in apartments with their
families and could relax at local bars, including one popular pub,
Goodfellas.

But after a rash of attacks around town last year, families have
packed up and gone home, while workers and executives have retreated
inside fortified bases surrounded by high walls and razor wire.

On a recent evening, about a dozen men, mainly Italians, settled at
the mess inside one such campus here operated by Eni to watch a live
soccer game from Rome on satellite television. The 50-acre compound
houses offices, dormitories, and some guest houses; there are tennis
courts and manicured lawns, a swimming pool and a new gym.

There is also a large field for soccer games between the company team
and local soldiers. The cook, the food and the wine come from Italy.

The Eni campus is an oasis compared with the rest of town, a chaotic
cluster of five million people. But violence can visit here at any
moment, as it did a few months ago when a cellphone-activated car bomb
blew up just across the street.

"It's sad what is going on here," said Marco Castelli, a manager at
Eni, who moved to Nigeria last June. After years living alone in
far-flung places like Kazakhstan, Congo and Iran, Mr. Castelli was
looking forward to a quiet family assignment in Nigeria. His wife was
about to quit her job as a marketing executive for a drug company in
Italy to join him.

But soon after he arrived, gunmen entered a bar in Aker Base, a slum
outside of Port Harcourt, and kidnapped an Italian worker. An army
sergeant was shot dead as he tried to stop the attackers. Later that
day, soldiers returned to the scene and razed the village.

The hostage was released the same week, but shortly after that event
Mr. Castelli's wife scrapped her plans to join him.

"The more the situation worsened," he said, "the more the restrictions
became tough."

Still, many workers here say they are undeterred by the violence and
few are considering leaving.

Antonio Fiore, an engineer with Eni, has been confined to the Port
Harcourt base since December. In his three decades with the company,
Mr. Fiore helped build a refinery in Iraq in the 1970s, worked on a
petrochemical plant near the Iranian town of Isfahan in 1989, and
spent time in Kuwait after the first gulf war. He has been posted in
Nigeria for the last three years.

"What we're doing here is important," he said. "I have been in many
critical areas. But for us, what happened last year was a nightmare."
--
Yoshie