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Two key issues are on a collision course - Nigeria's increasing role in supplying critical energy to world markets and its escalating lawlessness. What needs to be done to ensure the uninterrupted flow of Nigerian energy?
Nigeria's oil hub Port Harcourt has recently been the center of intense clashes between rival ethnic groups, criminal elements and the security forces. In addition, the overall security of the oil supply from West Africa is a growing concern for the United States.
Continued security risks to the oil industry were graphically illustrated on April 23 when militants murdered seven oil workers, including two US contractors, during an ambush on the Benin River, in an incident that caused considerable embarrassment to President Olusegun Obasanjo. The attack was just one example of the unstable security environment in the Niger delta, where various militant criminal gangs and ethnic-based militias have been embroiled in a battle for political and economic control of resources.
Following the murders of the oil workers, which is not a common occurrence despite entrenched instability in the region, the authorities, including Obasanjo and the federal government, pledged to take direct action against militants. This has led to an increased military presence since April. In May, the government launched a major operation against criminal activities and ethnic militia groups controlled by senior political figures, but the lack of direct action against the political sponsors of such groups has been a significant failure of the current security policy.
The increased military presence has disrupted some gang activity, and prompted some divisions between militants and their political leaders. However, the gangs are now operating without a cohesive central command, which has brought the violence out of the creeks and estuaries of the delta and into Port Harcourt. Following intense gun battles at the end of August, a joint navy, army and police operation instituted 24-hour patrols; this falls just short of announcing an official state of emergency.
Implications for business
Concerns are mounting over the implications of the security crackdown on future community relations. The security forces often use indiscriminate methods, leading to abuses and exacerbating hostility in the local community. The tactics raise questions for operators who try to abide by the UN Voluntary Principles on Security and Human Rights; oil operators have no real influence over the operations of the security forces, but their reputations can be tarnished by the actions of the security forces that are protecting their assets and personnel.
Much of the local population is related to or otherwise associated with the militants who are active in the region, and it blames oil companies for the presence of the security forces.
Various community groups also continue to blame major oil companies for exploiting resources without reinvesting money into the local community.
Nigeria's violent oil-producing region has also attracted the attention of the United States, which currently imports about 15% of its oil from the Gulf of Guinea, with Nigeria the primary exporter from the region. The Gulf of Guinea contains an estimated 15 billion bbl of oil in deep water. Protecting this supply is a major issue for the United States. Control Risks believes the risk of a potential terrorist attack on a US oil interest is low to insignificant; the region has no direct association to transnational terrorist groups and does not have home-grown cells with an interest in terrorism. However, the local security forces do not possess the capabilities of monitoring and mounting effective security measures to detect the potential of a terrorist attack.
Nigeria's oil producing region will continue to pose local security concerns for oil operators, and the prospect of expatriate fatalities remains a threat in addition to kidnapping, bunkering and overall disruption of oil production. However, Control Risks believes such operational risks remain surmountable if corporate security advisers undertake adequate security measures to control the movement of staff in the area; control access to company premises and assets; and continue to seek improvements in community relations in order to curb the hostility of some of the host communities in the region.
Control Risks Group, founded in 1975, is a business risk consultancy whose aim is to enable clients to take risks with greater certainty and precision and to solve problems that fall outside the scope of mainstream management resources. For more information, visit www.crg.com.