U.S. Markets close in 37 mins

Restive Oil Region Braces as Nigeria Heads Toward Election

Dulue Mbachu and Elisha Bala-Gbogbo
Restive Oil Region Braces as Nigeria Heads Toward Election

(Bloomberg) -- Heavily armed Nigerian troops crouch behind sandbags outside Royal Dutch Shell Plc’s Kolo Creek pumping station, underscoring the tension pervading the oil-rich Niger River delta before general elections on Saturday.

As the race between President Muhammad Buhari and his main challenger, Atiku Abubakar, nears its climax on Saturday, the military has stepped up its presence in the 70,000 square-kilometer (27,000 square-mile) southern region. The area, where most oil reserves in Africa’s biggest producer are located, is the source of two-thirds of state revenue and 90 percent of export income.

Army and police checkpoints dot the surrounding roads and waterways, where residents are routinely searched. Military jets fly low overhead hot spots, such as the Gbaramatu stronghold of wanted militant leader Government Ekpemupolo, who’s known as Tompolo.

“We haven’t really seen much of campaigning in these parts by Buhari’s people,” Pius Waritimi, a rights activist and art teacher at Niger Delta University, said in an interview in Yenagoa, the capital of Bayelsa, the state where Nigeria’s oil was first discovered in 1956. “What we’re seeing is an increased military presence.”

The Niger delta has been a byword for unrest for more than two decades, with the area’s ethnic minorities complaining they’re being cheated out of their wealth by the government and international energy companies and left with environmental ruin. Nigeria is the sixth-biggest producer in the Organization of Petroleum Exporting Countries.

Tension over the increased military presence has stoked anger toward the Buhari administration, according to Fyneface Dumnamene, campaigns officer for the Port Harcourt-based civic group, Social Action.

“The attitude appears to be that if Buhari wins, the election is rigged,” he said.

More than a decade ago attacks by armed militants almost crippled Nigeria’s oil exports, forcing the government to reach an amnesty deal in 2008 that gave former fighters jobs, skills training and monthly stipends.

After Buhari defeated Niger delta native Goodluck Jonathan in 2015, he canceled the amnesty payments only to reinstate them after another round of attacks slashed output. That along with a drop in world prices contributed to Nigeria’s first recession in a quarter-century.

But output has yet to recover to reach the government’s budget target of 2.3 million barrels a day and has hovered between 1.6 million and 1.8 million a day in the past two years. As oil majors moved most of their operations offshore to avoid the unrest, Nigeria pushed back its goal of 4 million barrels in daily production and 40 billion in reserves from 2010 to 2020.

While the wholesale sabotage of export trunk lines has abated, there’s a blossoming underground industry in stolen crude for local refining or sale to offshore vessels.

Aiteo Eastern Exploration and Production Co., a Nigerian oil company which bought the Nembe Creek Trunk Line, formerly owned by Shell, reports losing as much as 45 percent of the crude injected into the pipeline to theft on some occasions.

The typical illegal refinery is a scaled up version of the local gin distillery common in the region, with pots that can heat as much as 80 barrels of crude to produce kerosene, gasoline and diesel. Periodically clouds of soot descend on Port Harcourt from the hundreds of cauldrons.

“There’s a local economy built around it that involves payment of security forces, and the armed groups,” said Damian Gbogbara of the Youths Environmental Advocacy Centre based in the oil-industry hub of Port Harcourt. “Very few people in the community benefit, but everyone is exposed to the environmental dangers.”

The feeling that the federal authorities in Abuja, the nation’s capital, have abandoned the region, which is part of the predominantly Christian south, runs deep. Because both Buhari and Abubakar are northern Muslims, there’s little of the passion for the vote that ran high when Jonathan was a candidate.

Abubakar has the edge because his oil-service company Intels Nigeria operates the Onne Oil and Gas Free Trade Zone outside Port Harcourt and he’s pledged to give local authorities more control over oil resources.

Edwin Clark, the 92-year-old chairman of the Pan-Niger Delta Elders Forum which helped the Buhari administration negotiate with the militants in 2016, said his group supports Abubakar because of his stance on devolving power.

“Our message is that if you want to restructure Nigeria you are our man,” Clark said in an interview Sunday on Lagos-based Channels Television. “If you don’t want to restructure then you’re not our man.”

(Updates with Nigeria’s OPEC ranking in fifth paragraph.)

To contact the reporters on this story: Dulue Mbachu in Kolo Creek, Bayelsa state at dmbachu@bloomberg.net;Elisha Bala-Gbogbo in Abuja at ebalagbogbo@bloomberg.net

To contact the editors responsible for this story: Karl Maier at kmaier2@bloomberg.net, Karl Maier, Sophie Mongalvy

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.