Attacks on oil infrastructure will continue at least in the short to medium term, resulting in depressed oil output over much of 2016, according to analysts.
A wave of attacks on pipeline infrastructure in the oil-rich Niger Delta since the beginning of 2016 has had a devastating impact on Nigeria’s crude output, according to risk consultants PGO Intelligence.
Oil minister Emmanuel Ibe Kachikwu reported last week that production had fallen 40% from 2.2 mn barrels per day (bpd) to 1.4 mn bpd, the lowest level since the mid-1990s.
Attacks by militant group the Niger Delta Avengers have hit facilities owned by oil majors including Shell, Chevron and Eni.
Among the most significant attacks was the bombing of the Forcados Terminal subsea crude pipeline in February, which resulted in estimated losses of 200,000-300,000 bpd.
An attack on Chevron’s Okan platform in Delta state in early May forced the company to close the facility at a cost of a further 90,000 bpd.
Responding to the ongoing threat, both Shell and Chevron have evacuated non-essential staff from several facilities across the region.
“These incidents have raised fears of a renewed insurgency in the southern region, as such large and sophisticated attacks have been rare in the Niger Delta since the Presidential Amnesty Programme (PAP) for militants was introduced in 2009.
Although the programme had some success in reducing violence it has faced persistent criticism for failing to address the economic and political grievances that fuelled the conflict,” PGO said in a report.
“As a result, former militant groups have continued to engage in oil theft, kidnap for ransom, and piracy throughout the amnesty period, while hostility towards the federal government continues, evident in sporadic attacks on state security personnel.”
A government crackdown on illicit activities in the Niger Delta has also risked stoking tensions among militant groups in the region, PGO said.
Since assuming office, Buhari has taken steps to curb some of the most blatant instances of corruption in the military by reorganising the Joint Task Force in the Niger Delta, which in turn has disrupted a vital component of the smuggling networks that many criminal groups rely on to move stolen oil.
“There is a strong likelihood that the high frequency of attacks on oil infrastructure will continue at least in the short to medium term, resulting in depressed oil output over much of 2016.
“On 12 May, the NDA issued oil companies a two-week ultimatum to shut down operations in the Niger Delta or face attacks. Another previously unknown group, the Red Egbesu Water Lions, issued its own seven-day ultimatum on 18 May, shortly after blowing up an Agip pipeline in Bayelsa, and also pledged allegiance to the NDA,” said PGO.
Recent incidents have demonstrated the NDA’s technical competence, and future attacks could continue to involve more complex operations, including on oil installations in deep-water blocks where many international oil companies currently operate.
Onshore, the majority of the NDA’s attacks have focused on Delta state and installations there will remain at greatest risk, although installations in the area around Port Harcourt have also been targeted.
“In the months ahead, the government’s handling of its crackdown on militants will be key to determining whether violence will escalate to the levels seen during the 2004-2009 insurgency,” said PGO.