Massive Explosions Cripple Nigerian Oil Industry

Nigerian Crude Oil Production Halved by Militant Activity

Nigerian crude oil

On Saturday, 28 May 2016, a series of explosions rocked Nigeria as a new militant group – the Niger Delta Avengers – wrought havoc on crude pipelines and gas installations. The terrorist group was specifically targeting pipelines that belong to the UK-Dutch Shell company, and Agip. An ongoing campaign of violence against international oil companies has succeeded in destabilizing the Nigerian crude oil industry to such a degree that it has literally halved the production in the country. Militants are hell-bent on destroying the country’s number one source of revenue, owing to a personal beef they have with the government.

crude oil price

Dubbed the Niger Delta Avengers, the group has vociferously defended their actions on social media. The attacks perpetrated by this militant group are important on multiple levels, namely because of the fragility of the economy in Nigeria – Africa’s most important and prominent crude oil producer, and a major contributor of OPEC supplies. Nigeria has been responsible for the production of an estimated 2.2 million barrels per day, but now that figure has plunged to less than 1.4 million barrels per day owing to the ongoing attacks in the southern part of the country.

With production slashed in half, and oil trading at approximately $50 per barrel, Nigeria is losing $45 -$50 million per day in oil revenues. That translates into as much as $1.4 billion per month. The explosions, while targeted at economic facilities, are hurting the country in a big way. The presence of warring factions – the military and the militants – is causing widespread uncertainty and instability across Nigeria.

In the week ending Sunday, 29 May 2016, an estimated 3 terrorist attacks took place on the facilities owned by Chevron – a US oil-producing conglomerate. The situation has become so dire that major companies have begun evacuating their workers from certain facilities. According to the militant group, foreign oil companies have up until Tuesday, May 31, 2016 to close up operations in the southern part of Nigeria.

That region is an oil-rich territory known as the Niger Delta. According to the Niger Delta Avengers, ‘… Watch out… Something big is about to happen… It will shock the whole world…” In response to the terrorists, the Nigerian military, specifically 343 artillery regiment of the 2nd brigade and 82nd division of the Nigerian Army were involved in a fierce shootout with the militants on Monday, 30 May 2016. Several militants were killed and their plans to detonate oil pipelines were foiled.

The militants were on their way to key oil installations via speedboats, and they were engaged by the Nigerian military. Unfortunately, inclement weather prevented any substantive reporting on casualties and the militants were able to flee the situation. The oil facilities that were being targeted included the Nigerian Agip Oil Company.

In an effort to come to consensus with the militants, the federal government of Nigeria has been holding high-level meetings with militant leaders from the Niger Delta, some of whom may be directly involved with the NDA. The federal government in Nigeria is deeply concerned that the ongoing bombing campaign against oil pipelines and installations across the country is having a devastating effect on the economy. At stake is an amnesty program which will be phased in over 3 stages. The militants were serving as protectors of oil installations before 30,000 of them were axed.

Buhari - Nigerian Oil

Crude Oil: Tales of fears and nightmares

They are now seeking housing, social welfare, and aid on an ongoing basis. The Nigerian government fears that the current bombing campaign will destroy the country’s ability to provide the necessary support and structure that the militants are seeking. Meanwhile, the leader of the group bargaining with the government has appealed to the NDA to stop their bombing campaign.

The issues which have caused further agitation in Nigeria include the lack of a federal system, and who gets control over resources. For these reasons, the militants have stepped up their bombing campaign to force the change that they want to see. Now, the Nigerian president Buhari has vowed to step up

For these reasons, the militants have stepped up their bombing campaign to force the change that they want to see. Now, the Nigerian president Buhari has vowed to step up the dialogue with the militants but, has cautioned that their determination to continue engaging with the Nigerian military will result in severe punitive measures. The net effect of these explosions is the complete erosion of confidence in Nigeria’s oil productive capacity and the complete loss of confidence in the country’s already over-valued naira.