Nigerian militants threaten to bring oil industry to its knees

By Jacinta Moran and Mike Adebola

November 25 - Unrest in Nigeria's Niger Delta could pose a strong threat to the government, weakening its authority ahead of the presidential elections scheduled for January 22, 2011 and bring the oil industry to a stand-still.

The southern Niger Delta, which is home to nation's oil and gas industry, has been hit by a surge of violence in recent months after a period of relative calm that followed a government amnesty in 2009 and the disarming of thousands of militant fighters.

Nigeria's most prominent rebel group, the Movement for the Emancipation of the Niger Delta or MEND, threatened November 22 to cripple the country's oil sector after the military said it had arrested dozens of militants believed to have recently kidnapped 19 oil workers.

A military operation on November 17 freed the hostages -- including seven expatriate workers, who were taken from an offshore oil rig operated by exploration firm Afren on November 7.

Eight Nigerians were abducted from an ExxonMobil platform a week later, while the remaining four were employees of local construction firm Julius Berger.

In its first reaction after the security forces announced mass arrests as part of a clampdown on the kidnappings and attacks on oil facilities, MEND vowed "to bring oil companies operating in Nigeria to their knees."

MEND on November 23 said its fighters blew up a pipeline that supplies crude to the country's Warri refinery, sparking fears of a fuel scarcity.

"The attack on the link to the 125,000-barrel-a-day refinery took place on Nov. 21," Jomo Gbomo, a spokesman for the group said in an e-mailed statement. The "attack and similar attacks on pipelines which will take place within the next few days" are to show "the futility of wasting the nation’s resources in combating militancy without addressing the underlying causes of agitation in the Niger Delta."

Previous attacks by MEND fighters have significantly cut Nigeria's oil production, currently averaging around 2.2 million b/d. (See related table: Nigerian oil production (million b/d): 1998 - 2010).

Levi Ajuonuma, spokesman for the state oil company, the Nigerian National Petroleum Corporation (NNPC), on November 24 said repairs to the pipeline should be carried out within a short period and that the closure of the refineries would not disrupt fuel supplies across the West African country.

The pipeline that supplies crude to the plant in Warri is also the source of oil for the 110,000 b/d refinery in the northern city of Kaduna, Africa's biggest crude producer has four refineries but relies on fuel imports for more than 70% of its domestic needs.

Nigeria depends on oil for more than 90% of its export revenue and more than 80% of its government revenue.

Nigerian election stalls oil reform

Insecurity in the Niger Delta and funding shortfalls have for years hamstrung Nigeria's oil and gas industry.

Reforms to address the weaknesses of the state's management of the sector and consolidate the fragile peace process in the Delta now appear to hinge on the next presidential election, scheduled to take place January 22.

However, presidential incumbent, Goodluck Jonathan, lacks the support of party power brokers. (See related page: Jonathan a potential change from the established political order?).

Despite assurances from Nigeria's Petroleum Resources Minister Diezani Alison-Madueke, the long-awaited Petroleum Industry Bill failed to pass into law in October.

Similar unfulfilled assurances had been given earlier by Alison-Madueke and Presidential Adviser on Petroleum Emmanuel Egbogha that the bill would pass by end-August.

The PIB, first proposed by president Umaru Yar'Adua, who died in May, has been stalled in parliament for more than two years.

It is primarily designed to reform the NNPC and turn it into an effective commercial entity. However, it appears that lawmakers have little time for the controversial bill as their attention turns to 2011’s elections.

According to one Lagos-based analyst, "Although it is not pronounced, the whole of government machinery is now focused on the political campaign. The greatest fear is that the whole process [oil reform] may have to wait for the outcome of the next election as this will determine the direction of the policies of the next government on the economy."

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