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Nigeria oil production slides amid unrest

Nigeria relies almost exclusively on its energy sector for export earnings and 75 percent of federal government revenue, Graeber writes, but a long record of corruption, militancy and banditry has clouded Nigeria's oil prospects.

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Afolabi Sotunde/Reuters/File
A man arranges drums at an oil station and depot in Nigeria's capital Abuja. Crude oil production in Nigeria has suffered in recent years because of militant campaigns and sabotage in the Niger Delta region.
  • By Daniel J. Graeber Guest blogger

The wealthiest man in Africa said he's secured billions of dollars in loans to help kick start the refinery business in Nigeria. OPEC-member Nigeria is forced to import most of its petroleum products because of aging infrastructure. Crude oil production in Nigeria has suffered in recent years because of militant campaigns and sabotage in the Niger Delta region. Last month, the rebel Movement for the Emancipation of the Niger Delta said it was launching a campaign to save Christianity in Nigeria. With militant group Boko Haram seeking to establish an Islamic state in a country divided along religious lines, poorly maintained refineries may be the least of Nigeria's concerns.

Nigerian business magnate Aliko Dangote said he's secured $4.25 billion in loans from domestic and offshore banks to breathe new life into the refinery business in Africa's largest crude oil producer. Nigeria exports about four times as much crude oil as it can handle with its existing refineries. Aging infrastructure and poor maintenance means Nigeria has to rely on imports to meet domestic oil requirements and Dangote said such a significant investment makes good business sense. (Related article: SOUTH SUDAN: More Good News for Oil Production)

The U.S. Energy Department's Energy Information Administration said Nigerian oil production peaked at 2.6 million barrels per day in 2005. Since then, militancy and corruption have contributed to relative declines in production. Last week, Timipre Sylva, former governor of southern oil-rich Bayelsa state was arrested for fraud, adding to a steady stream of corruption charges filed against officials in the Niger Delta. Later this week, lawmakers said they will look into allegations that Nigerian Oil Minister Diezani Alison-Madueke is loosely connected to some shady deals involving Niger Delta oil blocks.  President Goodluck Jonathan, himself a former Bayelsa governor, said he would crack down on corruption, though recent developments show his efforts so far have lacked teeth. 

Satellite images surveyed by Human Rights Watch show what appears to be "massive" destruction of the Nigerian town of Baga. Residents of the northern town told rights investigators that Nigerian forces razed the area after members of Boko Haram attacked a military patrol, leaving one Nigerian soldier dead. At least 183 bodies were uncovered after the attack. Last month, MEND said it would start a campaign in late May to save the Christian population of Nigeria "from annihilation" by bombing mosques and assassinating Muslim clerics. MEND in mid-April attacked an oil well on Bayelsa state that belonged to Royal Dutch Shell. (Related article: Kenya Aspires to be East Africa Hydrocarbon Transit Hub)

OPEC said in its May report that Nigeria crude oil production was around1.73 million barrels per day, down roughly 5 percent from the first quarter of 2012. A long record of corruption, militancy and banditry has clouded Nigeria's oil prospects. Nigeria relies almost exclusively on its energy sector for export earnings and 75 percent of federal government revenue. While Dangote's recent initiative may be well-intentioned, it's a questionable investment given the Nigerian state of affairs.

Original article: http://oilprice.com/Geopolitics/Africa/Nigeria-may-be-Next-OPEC-Member-to-Fall.html

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