The Oil Drum: Europe

On the heels of this weekend's Saudi Oil summit, Nigerian production has dropped to the lowest level in 25 years. This was in part because militant attacks shut in as much as 345,000 barrels per day of Nigerian production in the past few days. The Nigerian militant group MEND (Movement for the Emancipation of the Niger Delta) has demonstrated a continuing ability to interrupt production from Nigeria's mature, onshore fields. However, the future promise of Nigerian oil is not onshore. Rather, it is the 1.25 million barrels per day of offshore production scheduled to come on line in the next 6 years. Analysts previously believed these offshore facilities were out of MEND's reach.

This assumption--that far offshore facilities are beyond the reach of militants--must now be reconsidered. The week's most successful attack, shutting in 225,000 barrels per day, came against Shell's Bonga facility. At 120 km offshore, the Bonga attack demonstrated a new militant capability in the offshore environment. As Nigeria is one of the few states with the geological potential to significantly increase oil production and exports, the Bonga attack may prove to be an extremely important development.

Shell’s $3.6 billion “Bonga” Floating Production, Storage, and Offloading vessel (FPSO), 120km from shore in 1000m deep water, was recently attacked by MEND militants.

This story was originally posted 3/11/2007, here is a link to the original if you would like to see the old comment thread.

When a fire becomes sufficiently intense, its heat creates a rising column of air so strong that surrounding air is drawn into the void, creating a draft that sustains and intensifies the fire. It becomes a self-sustaining, self-intensifying organism: a firestorm. The violence in Nigeria’s delta region has become a firestorm, and the consequences of this transformation will fundamentally impact that nation’s ability to export oil. Recent events in the delta region have transitioned the violence there from a negative-feedback loop where there was a disincentive to militants to shut in too high a portion of Nigeria’s oil exports to a positive-feedback loop where militants will compete to completely destroy Nigeria’s capacity to export oil.

Figure 1: Nigerian Militants in a Speedboat

When a fire becomes sufficiently intense, its heat creates a rising column of air so strong that surrounding air is drawn into the void, creating a draft that sustains and intensifies the fire. It becomes a self-sustaining, self-intensifying organism: a firestorm. The violence in Nigeria’s delta region has become a firestorm, and the consequences of this transformation will fundamentally impact that nation’s ability to export oil. Recent events in the delta region have transitioned the violence there from a negative-feedback loop where there was a disincentive to militants to shut in too high a portion of Nigeria’s oil exports to a positive-feedback loop where militants will compete to completely destroy Nigeria’s capacity to export oil.

Figure 1: Nigerian Militants in a Speedboat

Reuters:

A pipeline explosion killed up to 200 people on the outskirts of Nigeria's biggest city Lagos on Friday, police said.

The Red Cross said the pipeline blew up while vandals were tapping into it to steal petrol, igniting about 500 nearby jerrycans full of fuel. Theft of fuel or crude oil from pipelines is common in Nigeria.

Hat tip: Leanan.

Update [2006-5-12 11:49:31 by Super G]: MEND denies involvement.

[editor's note, by Prof. Goose] Also, we should bring back Dave's (really great) post on Nigeria, which you can find here; I would also direct you to John Robb's piece here. Both are pretty prescient.

Let's take an in-depth view of the the ever-worsening potential oil shock in Nigeria and its implications for US imports and world oil prices.

First, for some background. Almost of all of Nigeria's cuurent production of about 2.6/mbpd comes from the onshore Niger Delta region shown here.

 
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