Nigeria’s energy minister, Rilwanu Lukman, has just warned that more than half of his country’s oil production capacity has been shut-in as a result of ongoing violence and sabotage against the federal government and petroleum companies, notably Shell.
Lukman said late-July that some 1.6million barrels per day of production out of a total capacity of 3.2million bpd is offline.
Exact figures for Nigeria’s production are difficult to obtain, with different amounts cited by different officials. For example, Nigeria National Petroleum Corporation (NNPC) claimed in June that shut-in capacity was 1.9million bpd.
For now, a 60-day ceasefire is supposed to be in force between the major insurgent organisation, the Movement for the Emancipation of the Niger Delta (MEND) and the government, but MEND has warned oil companies not to attempt to repair any of their facilities that have been sabotaged or attacks will resume.
There are many oilfield people in Aberdeen with direct experience of working in Nigeria and stories of kidnaps have unfortunately become a regular part of the Press and Journal’s news coverage. Not good for business.
West Africa is a very important part of the internationalisation drive by the Scottish/wider UK-based oil&gas supply chain. This push is actively supported by the dedicated group known as UKWAAG – UK West Africa Action Group – which is headquartered in Europe’s energy capital.
US veteran of oilfield reportage Dev George has calculated that the cumulative cost of insurgency to the companies, especially Shell, IS around $80billion. He proposes a solution that, on the face of it, is neat. The companies get their act together and stump up the cost of major social programmes themselves and treat the people of the Niger Delta area fairly.
Shell’s role in this mess is probably considerable, bearing in mind that, according to George, in 2006, before the beginning of attacks by insurgents (primarily MEND), about 1.2million bpd of Nigeria’s oil production was produced by Shell and its NNPC joint venture, Shell Petroleum Development Company (SPDC).
He says estimates of SPDC’s output today vary considerably, but they are well below the 2006 figure. The toll of rebel attacks in the ensuing three years has reduced the company’s Nigerian production to no more than 1.1million bpd, a loss of 1.2million bpd.
Based on mid-July oil prices (roughly in the low $60s per barrel range), George calculated that this represented a loss of $79.8million a day – that’s more than $87billion in the three years.
MEND, of course, wants to see Shell ejected from Nigeria – and Chevron and everyone else. Quite what its view of Gazprom is no one knows.
The Russian behemoth has been schmoozing the Nigerian government for a couple of years at least and, very recently, struck a deal calculated to basically deliver the country’s gas resources into its control.
Despite its pledges, including through the likes of Transparency International, the Nigerian government is manifestly failing to get to grips with the Niger Delta problem. Moreover, it doesn’t even seem to want to solve the problem.
George is succinct in his summing up of this band of politicians: immoral, unethical, they display no regard for human rights, and they have a past record of “corruption, graft and embezzlement of public funds”. That, of course, puts Shell and the other companies in a very difficult situation. But someone has to break the deadlock so, as George proposes, why not the companies themselves; entirely out of self-interest, of course.
George says it could cost Shell & Co $8-10billion to “pave roads, string electric lines and lay water and gas pipelines to provide the basic infrastructure that is so sorely needed now; to build and equip schools, hospitals, and clinics; then to establish training for local residents, not only for employment in the petroleum industry, but to give them the capabilities needed for work outside the oil and gas sector”.
He reckons that lump of money would be recouped within a few years. He points out, too, that Shell & Co are, in any case, legally committed to contribute 3% of their annual capital budgets to the Niger Delta Development Commission (NDDC), but they don’t, for obvious reasons.
That begs the question as to what they have done with that money. Did they place it in escrow perchance? That would be the ethical thing to do. On that basis, there should be a stack of money ready to hand to get on with the task in the manner proposed.
The thesis is simple – if Big Oil can show the millions of people to whom the Niger Delta is home that it really does care and that such levels of expenditure are not grudging lip service, perhaps MEND would quietly melt away over the next several years as people gained self-respect and maybe the courage needed to take on the corrupt politicians residing in the palatial ivory towers of Abuja.
Leaping from Nigeria to the UK and from petroleum to renewables – specifically the planned closure of the only sizeable wind-technology factory in this country.
It is not long since Danish group Vestas dumped Macrihanish in Argyll, leaving Scottish Enterprise/Highlands and Islands Enterprise scrabbling around to rescue jobs, and retrenched its UK operations.
Now Vestas is pulling out completely, shutting down its blade manufacturing facility on the Isle of Wight and slinging more than 500 people on the jobs scrap heap. The company’s excuse is that the plant must close as demand for turbines has fallen in northern Europe. Funny, isn’t it? Vestas has just reported a quarterly leap in global sales of 59%.
Funny, too, that offshore wind is just starting to take off and that the estimated future demand for turbines offshore northern Europe is a staggering 18,000 units based on five-megawatt machines, and obviously many more if smaller turbines of the type Vestas is currently offering are deployed.
That number is not one Energy has grasped out of the ether. Danish offshore turbine installation company A2Sea did the sums, and they’re probably as good as anyone else’s. One-third are destined for UK waters.
And yet the UK cannot even manufacture blades? Our Government, banks and business leaders are utterly crackers if they can’t make this one work.