Chevron Nigeria received reports that at about 11pm Wednesday 4th of May, 2016 their Okan Valve Platform offshore Abiteye, Warri South West Local Government of Delta State, had been breached. This platform serves as a production hub for Chevron Nigeria/NNPC JV south and north offshore production. This means all of the oil and associated gas produced in fields offshore get to flow through this platform en route the terminal in Escravos. The company immediately moved to shut in all of its production in those areas to enable them contain the environmental impact from loss of containment.
While still trying to respond and swing into emergency/crisis management mode, there was yet another series of attacks, this time on their onshore area installations, Makaraba, Utonana, Abiteye, Opuekeba, pipelines supplying the Nigerian Gas Company were hit in a clearly syndicated attack. A militant group who refer to themselves as “Niger Delta Avengers” have since issued a statement claiming to be responsible for this sabotage. This same militant group had on 13 February, 2016 claimed responsibility for blowing up Shell Petroleum Development Company/NNPC JV’s Forcados export line with a capacity of 300,000 bpd. The group in their statement has vowed to cripple the Nigerian economy.
Information reaching SBM Intelligence puts the actual daily loss due to shut out production at the Forcados line at $12Million. Repairs have been scheduled for the 26th of May, but this is however subject to clearance on safety of the personnel who will carry out these repairs.
Nigeria’s 2016 budget is benchmarked against a 2.2 million bpd. This new attack is a blow on the government’s revenues and will potentially increase the budget deficit. With the impact on the gas supply lines, the already dire power situation is sure to become even worse as gencos will be unable to receive gas required for power generation.
At least five of Nigeria’s gas powered electricity generating plants, Egbin, Geregu, Olorunsogo, Omotosho and Ughelli, with a combined generating capacity of 1617MW are reported to have been knocked off the national grid. SBM Intelligence has made efforts to find out the exact state of these plants, but has been unable to because the power situation prior to the attack was abysmal to begin with.
A different type of militant
Analysis of the facilities attacked points to one thing – we have a very well equipped and determined militant group in the Niger Delta, with a level of sophistication and skill far above what the previous militants could boast of. The installations that were blown up are 6m and 8m below the surface respectively, requiring deep-divers and significant expertise to lay the explosives. The location 8m below has a clamp on that line, yet they were able to target these points and take them out. The degree of accuracy to target locations with such huge impacts on production numbers with such few attacks points to some degree of intelligence information available to these militants. There have been unconfirmed reports that there are ongoing negotiations between the militants and the oil companies to the tune of millions of dollars to allow the necessary repairs to be done for the oil to start flowing.
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Throwing money at this problem will not fix it, rather it will make it worse as more groups emerge with grievances about being left out of the “sharing”. It is also clear that the use of force will be counter productive. It is doubtful whether the Nigerian military has the ability to fight insurgencies on multiple fronts.
It is also obvious that Nigeria, at least in the short to medium term, will continue to depend on money made from the sale of crude oil, and at 1.4 million barrels a day being pumped, this leaves our budget 20% short (oil price calculation was $47 per barrel). Nigeria needs to tow another path, and that is the path of inclusiveness. The Nigerian government should make every effort to make the people of the Niger Delta feel a part of the country. We believe that President Buhari should make a visit to the region, rather than continue on the path of making threatening statements. The militants have not been very helpful to their people, and that presents an opportunity that can be tapped. Involving the people, will blunt the edge of the militants’ weapons.
Featured image credit: The Guardian