Mass violence is just about a daily occurrence in Nigeria. This week, for example, “at least” 24 people were killed in Maiduguri, a city of over 1 million people in Borno State, north-eastern Nigeria, when the military skirmished with the radical Islamist sect Boko Haram. On Wednesday, a bomb exploded in Potiskum, a city of 200,000 people, in Yobe State, killing a police officer. Boko Haram likely targeted the military, which responded with door-to-door searches and burned down “at least” four houses. Gunshots were fired throughout the day. The same day, police disclosed that “at least” 30 people were killed in Benue State in Central Nigeria, when nomadic Muslim herdsmen attacked a village of Christian Tiv people.
The oil industry in the Niger Delta hasn’t been spared either. Nigeria is the largest oil producer in Africa and has the ninth largest proven natural gas reserves in the world. Oil accounts for 95% of its export income and 40% of its government revenues. The sector currently produces about 2.13 million barrels per day (bbl/d), though it has the capacity to produce over 3 million bbl/d, if it weren’t for this nightmarish scenario—described in the dry manner of the US Energy Information Agency:
Local groups seeking a share of the oil wealth often attack the oil infrastructure and staff, forcing companies to declare force majeure on oil shipments. At the same time, oil theft, commonly referred to as “bunkering,” leads to pipeline damage that is often severe, causing loss of production, pollution, and forcing companies to shut-in production.
Development of natural gas resources has been handicapped by limited infrastructure, such as pipelines and LNG export terminals. Even natural gas from oil wells cannot be used for electricity generation and is therefore flared. Why?
According to an estimate by the International Energy Agency, the electrification rate for the country is only 50%, leaving 76 million people without access to electricity. And those with access don’t get very much: installed capacity is only 6 GW, the equivalent of three larger power plants in the US—for a country of 170 million people.
Hence, of its total energy consumption, 82% is from wood, waste, and similar materials used for heating, cooking, etc., particularly in rural areas. So the government is talking about plans to improve the electricity infrastructure and create 40 GW of new gas-fired capacity by 2020—a huge jump. These plants would be able to use the gas that is now flared … which would require equipment and infrastructure to treat and transport the gas, which is the problem to begin with. And so, plans have a way of dissipating into the urban muck.
Take the Petroleum Industry Bill (PIB). Introduced in 2008, it was supposed to finally create a regulatory framework for the oil and gas industry and alleviate some of the investment headaches. It’s still not passed. So the nightmare continues:
Exploration activity levels are at their lowest in a decade and only three exploratory wells were drilled in 2011, compared to over 20 in 2005. Rising security problems related to oil theft, pipeline sabotage, and piracy in the Gulf of Guinea, coupled with investment uncertainties surrounding the long-delayed PIB, have curtailed oil exploration projects.
Nigeria has a big goal: increase production to 4 million bbl/d. In 2005, it reached 2.63 bbl/day. But then militant violence surged, including kidnappings of workers and takeovers of rigs. Companies withdrew their people. By 2009, production had plunged 25%.
That year, an amnesty deal was negotiated with the militants. But it didn’t stop the problems. Pipeline vandalism and oil theft skyrocketed 224% in 2011 from prior year—thieves might puncture pipelines, or steal the black gold from the wellhead, or, ingeniously, fill up their tankers at the export terminal. Some of this crude ends up at illegal refineries in the swampy area of the delta, some of it on the international markets. In April alone, the staggering quantity of 400,000 bbl/d was pilfered, pushing official oil sales down 17%.
Incidentally, the US is still the largest export market for Nigerian crude. But rising production in the US has driven down all crude imports, with a disproportionate impact on Nigerian crude, down to a 5% share, from 11% in 2010.
Sabotage, theft, and decrepit infrastructure have caused about 2,400 oil spills between 2006 and 2010, contaminating soil and water, destroying fish stocks and agriculture, and depriving locals of their livelihoods—which has given rise to additional tensions.
And there are pirates: in the Gulf of Guinea, 53 piracy attacks occurred in 2011, up from 47 the year before, resulting in harmed crew members and stolen crude, and impacting deepwater operations that had mostly been spared.
When I traveled overland through Africa, I ran into Nigeria for the first time in Togo. The official language in Togo is French, but Nigerians speak English—and they were everywhere. One evening, an acquaintance in Lomé unloaded: Nigerians were crooks and thieves, he said, and no one wanted to deal with them. He had gotten hit, three times. With stolen credit cards and forged CFA francs. Nigeria was falling apart, he said, and Nigerians were spreading out all over the place. They were economic refugees, so he wanted to give them the benefit of the doubt, but not anymore.
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