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Nigeria’s Oil and Gas Fiasco
Wolf Richter www.testosteronepit.com www.amazon.com/author/wolfrichter
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 [ The Coming American Energy Independence].
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 is French in Togo, 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…. And his voice trailed off.
That life-changing journey through 24 African countries is subject of a forthcoming book, the third in the series. The first is available now: BIG LIKE: CASCADE INTO AN ODYSSEY—a “funny-as-hell nonfiction book about wanderlust and traveling abroad,” a reader tweeted. Read the first few chapters for free on Amazon.
And here is Marin Katusa’s must read: Will Iran’s Runaway Inflation Spark an Oil Bull Market?
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I dont get it, whats Jello Biafra doing in Nigeria, and what does Procol Harum have to do with this?
Sounds just like the oil industry where there is no rule of law...quelle suprise...
Another poster child for the anarchists..... hee, hee, hee....
It is, has been, will be and effort in futility to fix the level of stupid in the Oil industry.
You seem to disagree with Uncle Milton and Ayn... The oil cos. are only acting in their best interest and maximizing current profit...
By any measure of the ideological leanings of the past 30 years of the industrial west, that is called "winning"....
Easy on Nigeria, testy. The Finance Minister and I have a little thang goin' on the QT.
That situation is something that is impossible to change.
If you give away all the oil revenue of the country and distribute it to the people, then each person will get about $1.
That is just too little, so there is no way to reduce poverty in Nigeria.
Did you know the population expanded by 60% in the last 18 years? And the UN expects there to be around 700 million Nigerians by 2050?
Looks like the typical geometrical population over-expansion leading to resource depletion and ecological collapse dynamic here. Typical for r-selected populations, that is. And if you don't know what r & K selection are, then by all means, look them up.
For all the multi-culti apologists for Africa on this blog: Shell, Total, and colonialism are not driving this dynamic; and never have been.
Hey, did the NIGAZ partnership ever materialize?
Ever heard of the Biafra war; it occured in the 1960s and it was power play between french and anglo interests to manipulate tribal and ethnic differences around the southern tip of Nigeria where all the oil lay. And SHELL won!
And for sixty year its been the same stuff; corrupt governments in Nigeria and one Boss man : Shell. Just like in neighbouring Gabon and Congo where Total runs the french show.
Nothing has changed in the oil game in that part of the African continent and its a eternal shame to the west that this situation gets worse...Nemesis, nemesis, nemesis.
The whole power structure has to change in these countries but first of all they have to kick out these neo-colonial warts called oil majors; and their crony politicians.
The current vandalism is an expression that the people know their rulers are endemically corrupt ad thus without hope.
Sorry, falak, but nothing of consequence happened in the twentieth century except the holocaust!
and there was only one, not 200-400.
oh really, I thought the world had two WWs and a lot of earth moving changes like the current conundrum....not mentioning all the regional wars...
Reading comprehension skills are good to have, along with a sense of ZH sarcasm.
two edged sword.
The current valdalism is a failure of culture, just as the islamic terrorism in the north is a failure of culture. Corruption is not caused by wealth, it is an expression of a culture of small group selfishness, i.e. tribalism. Because of its tribal culture, most of Africa will never amount to spit. If not for colonialism and western investment, Africa would still be the dark continent. If not for British rule, India would still be governed by local tough guys.
Tribalism is not as bad as colonialism; its just that they adhere to another eco system and political model, an older one, like the original amerindian.
They are only predators on a small scale, in their vital space. Colonialism ratchets up the predatory nature of man to a much higher level. That is the personification of evil as we define it in ALL value systems since the beginnings of time; notably in morally coded Abrahamic society as in Greek logic thread.
Now if you believe in humans as being uber and sub human categories and in "manifest destiny" as being the great definer of heirarchy order, then that's fine; in my book thats being on the side of evil; it has nothing to do with being superior in the sense of higher civilization; 'cos that means not being a predator; aka golden rule.
The US was built on a freedom and moral platform to free 'new man' from his predatory nature. Its now morphed into a predatory empire; like Rule Britannia or France were in Africa.
Now you are justifying the unjustifiable to prove "we are right, they are wrong". Those are not US' original values.
The current Oligarchy presence of Western interest rapes the people of "inalienable" rights, pilfers their country's natural resources with NO payback to them, leaves their eco system destitute, and their people "drugged" on pestilence to their own value system criteria. Its like repeating what the Pioneers did to the Amerindian nation, when they had already won the territory. Big time, no sharing, no inalienable rights. Evil.
India under the Raj, as opposed to India now?
Or Congo, Zimbabwe, Indochina?
just curious to know who are you to tell whats good for them?
Or r u one of them?
How would u be liked to be treated like expendable collateral?
A detail of human will imposed by others
I feel good about NOT taking that $30K/mth job in Nigeria 5 years ago.
I've got an answer of sorts.
When I was in N Africa, Libya 1991, I saw that, despite draconian economic sanctions, Libyans were on the up ... because the oil-wealth was being widely distributed due to Qadafi and his Jamaharia/Islamic 'socialist' ideology.
It is a matter of public record - just Google - that Libya had record in nearly everything in Africa, e.g. literacy, health-care, education, infant mortality and more ... better than some "first world" countries though, after WW2, the UN classed Libya as amongst the poorest countries, under the British installed King Idris and who enriched himself with proceeds from newly discovered oil ... which is why Qadafi was able to lead a bloodless coup.
Subsequently oil was nationalized, the wealth was shared and there was no social unrest ... well not until a year or so ago when Qadafi tried to break ties to the USD, establish a central bank backed with gold and proposed a Pan-African liberation from Western domination.
The rest is the recent history of destroyed Libya, so whilst some Nigerian might try to implement a "Libyan solution", the result would be his gruesome death and Hillary Clinton gloating over the bloodied corpse.
So unless you believe the MSM about Qadafi and therefore support Washington/Wall Street, you should realize that Nigeria has no answer to social unrest ... because it would be ruined like Libya, Iraq, Syria, etc..
Libya is fundamentally different: for 6 million people, the oil revenue from the current 1.4 mbpd production is a significant amount.
For Nigeria, the revenue from 2mbd for 170 million people is negligible. Therefore Nigeria does not need to be ruined, it already is. And there is nothing you can do, the US could not even pacify Iraq with less than 1 tenth of the population of Nigeria. Not even 1 million soldiers can police a country of 170 million.
yes, and the aquaduct he constructed was an engineering coup.
trust me, the emerging generation of arab (and persian) leadership is WELL aware of the sordid details regarding the lybian tragedy; and they agree on whom to blame.
our duplicitious scheming in lybia was/is shameful. the blowback from our betrayal will start to gust shortly; and i'm not even counting the ambassador assignation (which stinks to high-heaven).
wait...did ya hear that?...sounded like it was coming from the direction of saudi arabia... awww, forget it; twas probably nuthin.
stop, children, what's sound/
everybody look what's goin down,
janus (i wonder what that song sounds like in arabic...maybe as a call to prayer at sunrise)
<waves>
Hope you are right janus ... and would it not be good if far more in "The West" woke up to the sordid details of many things, e.g. the USS Liberty and 911, amongst a myriad signal events in the lead-up to possible WW3.
I hope that at least the Persian leadership is prepared to try to withstand yet another Washington/Tel Aviv/NATO attempt to sanction and bomb another nation into submission.
As for the House of Saud ... yes there are stirrings.
Sounds like Kony might be hiding out in Nigeria.
This piece is weirdly coincidental to an agreement I just reached with a member of the Nigerian royal family who needed help getting $60 M in oil dollars out of Nigeria. I stand to make a tidy profit. First come, first served, bitchez.
Gratz on your payday! We need to increase the presence of US military advisors and troops. When we have killed 10% of the" bad" population that hate us for our freedoms, then the "good" people with identification papers can enjoy freedom and democracy between 8 am and 5pm outside their homes.
Well the US has lots of space ... why don't they just come here?
Post is relevant. Boots on the ground. Thanks, Wolf Richter.
"Sabotage, theft, and decrepit infrastructure". Every African nation in a nutshell. Really, there's not any news in this article to anyone who's paid the slightest attention to Africa in the last 40 years.
What's the point? That African countries (sub-saharan or otherwise) are grabastic piles of amphibian shit ready to detonate at any momoent into sectarian and/or tribal violence? That despite sitting on some of the most valuable remaining mineral deposits on this resource-ravaging planet, they can't get it together enough to turn all that resouirce wealth into real working nations? Again, this is not news. Shit, Nigeria is still struggling to come to terms with the Biafran war, much less drag themselves into the 21st century.
Same as everywhere else the problem is not the system or country the problem are the people, everybody loves to make excuses about colonialism, tribalism etc. it's all BS it's all about the individuals same true for Europe, America and Asia, people define the environment they live in, if you want to know the people just look where and how they live, you don't even need to speak to them, in fact you shouldn't because everybody has a sob story to tell about why they suck at life
Bingo.
I really wonder if their is any merit to the idea that certain people are lesser than others, i know i know, but when we look at the mess of africa and compare it to rome 2000 years ago, we kind of see whats going off.
A book comparing IQ's. IQ's vs. Race. IQ's vs poverty, illigitimate children, incarceration..... the list goes on.
spoiler alert. african decendents might not be as bright as others.....
http://en.wikipedia.org/wiki/The_Bell_Curve
Of course, there are books arguing against this, as the population sampling and sample size in question were done in the US.
in 19 minutes I learned practically everything I know about zimbabweans
from a 6 year old kid from ireland
or else it's just another kony video
"When I traveled overland through Africa, I ran into Nigeria for the first time in Togo. The official language is French in Togo, 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…. And his voice trailed off.
That life-changing journey through 24 African countries is subject of a forthcoming book, the third in the series."
Reading these articles is like watching a children's cartoon. The content is inane and serves little purpose except as a way to guide readers to the merchandising spiel at the end. Dude, just put your link at the bottom and stop with the poorly written self-promotion.
"And his voice trailed off?" This is an example of your writing in the book that you want to highlight?
Who was this acquaintance and why should we trust his opinion about Nigerians based on anecdotal comments without substantiation? "..no one wanted to deal with them" and yet this guy did...3 times at least. Is he a slow learner?
Perhaps he just had the unfortunate luck of dealing with 3 bad Nigerians or he was simply a bad judge of character or he was a bad businessman. Maybe he really did think the Nigerian ambassador to Lithuania was going to send him money? Maybe he was making a killing and wanted it all for himself so he talked them down to all of the wanderlust travelers he ran into.
We don't even know his nationality, Togolese, Nigerian, French, American...what? Did he speak English or French? Which might give us a clue except you don't tell us. And if you aren't going to tell us, why include the part about the language?
Too many questions in that one paragraph to make it worthwhile to purchase the book. It's a shame, too. The book might actually be good.
suteibu - your comments are better than the article
I don't even know where to begin with this "thing" passing as an article or posting.
Nigeria (like much of Africa) is tribal. Conflicts such as that involving Boko Haram are often portrayed through a strictly religious lens (Muslim v Christian) but its actually more akin to the Hatfields vs. the McCoys. The troubles in the north now are extremely problematic because the government is afraid of domestic blowback if the situation north of Nigeria (in Mali) isn't handled well, Right now there are smaller conflicts revolving around greed, theft, corruption, self-determination, and tribal vendettas that pose a threat of metastasizing into a broader conflict which might destabilize the existing power sharing structure, which was already been under pressure since Goodluck Jonathan transitioned from acting to elected President, and has been further impacted by some of the anti-corruption actions of the Government.
The petroleum industry is a mess but FDI (new wells) and gas flaring aren't very high on the list of problems. Electric plants are "nice to have" but they require paying customers to justify the construction costs. Incidentally, the paying customers in Nigeria already have their own diesel generators. The biggest oil problem is lack of domestic refining capacity, this led to huge balance of trade losses, as well as graft losses when the domestic fuel subsidy was in place (payments of the subsidy which should only be a fraction of refined imports were billions more than total refined imports). While the US might be moving away from light sweetness towards dirty tar sands oil, there are (an will remain) many export markets with a preference for Nigerian products. However, from the macro standpoint of oil economics, the Nigerian position is strengthened by adding value locally (through refining) instead of simply exporting crude. Enter China with 30B in new refinery construction & operation contracts, as well as off-take agreements. If Nigeria can actually get done what it is trying to get done, then the oil industry will be fine, barring the enlargement and merging of the many smaller violent domestic conflicts.
scavenger hunt - help needed
this request is about gmo foods (tangentially related to natural resources in africa)
please help locate and link to a digital copy of Canadian Commercial Policy (1957) or other reports by the Royal Commission on Canada's Economic Prospects.
the question is whether anything in the book suggests the existence of a government-and-corporate-backed viewpoint consistent with supporting patents on genetically modified foods
the commission's publications might be at a library near you
why the interest, you ask?
well.
the assistant secretary of the commission was william andrew mackay.
the one who decided the 2001 monsanto case in canada.
Perfect article to serve as a bulletin board. Anybody got any PTA or church news?
LOL.... missing pot luck responsibilities for a perfect 10 comment.
mean.
but funny/apt.
Click to watch video.