Saturday, March 25, 2006

Scotland's Sunday Herald: 'Reserves under the Gulf of Guinea may yet prove to be bigger than anything yet discovered'

Scotland's Sunday Herald: ' Reserves under the Gulf of Guinea may yet prove to be bigger than anything yet discovered'

In an excellent and profoundly well-informed article by its Johannesburg correspondent Fred Bridgland, Scotland's Sunday Herald this morning reports - amid a long analysis of Nigeria's stability and corruption issues - that the Gulf of Guinea may hold more oil than any other reservoir heretofore discovered on earth.

The claim is not well-supported, but given the context and surrounding information, it is believeable.

Here is an exceptional article for all who want to understand the risks of investment in the Gulf of Guinea and the tremendous rewards that may spring from peaceful exploitation of its recources:

Big oil and the troubled waters of the Niger Delta
From Fred Bridgland in Johannesburg

A LITTLE over 10 years ago, the Ogoni writer and environmentalist Ken Saro-Wiwa made world headlines when he was executed by Nigeria’s military dictatorship in the middle of a Commonwealth summit in New Zealand – despite all the leaders’ appeals for mercy.

At the time, Ron van den Berg, the Shell Oil Company’s managing director in Nigeria, commented to London-based specialist intelligence publication Africa Confidential, that the executions of Saro-Wiwa and eight of his fellow ethnic Ogonis – activists against the despoliation of the Niger River Delta by international oil corporations – would enhance Nigeria’s stability and avert civil war.

Contrary to Shell’s hopes, Saro-Wiwa and his martyrdom placed the worsening political and environmental crisis of the oil-rich Delta at the centre of national politics. It has stayed there, and now the calamity is greater than when Saro-Wiwa went to the gallows. The Delta is more violent, more anti-central government militias and criminal gangs led by warlords operate there, and they are much more heavily armed and more ruthless.

Rebels On Patrol in the Niger Delta of Nigeria are stimulating security pacts between Nigeria, the United States and China that would protect oil interests there. Meanwhile, a Chevron well in the Nigeria-Sao Tome and Principe Joint Development Zone and articles in major European newspapers are hinting at one of history's biggest oil finds - perhaps the biggest - a hundred miles offshore in areas rebels can't reach. Even as these young Ijaw men face well-trained navies and reduced drilling activity, the money flow seems to be moving away from them, too.
Photo: The Punch of Nigeria

At government and military levels, corruption and fraud in the acquisition and selling of oil and gas has exacerbated the crisis. The poverty-stricken people of the Delta, championed by Saro-Wiwa, continue to suffer impoverishment, unemployment and the pollution by oil firms of their once pristine homeland.

Discontent is so heavy in the Delta that a major escalation of the current low-level civil conflict, which takes some 1500 lives a year, could have unpredictable consequences for an inherently unstable country, the most populous in Africa, with some 140 million people divided into more than 250 ethnic and language groups.

The consequences of such an escalation, which some American writers are predicting will become the “new Iraq” – an over-exaggeration at the moment – would indeed be serious for Western economies and for the world as a whole.

With Nigeria and its Delta oil reserves at the hub, countries in the armpit of West Africa – where the north-stretching coastline turns westwards around the Gulf of Guinea – are expected to supply 20 to 25% of the United States’ oil imports by 2010, putting the region ahead of Saudi Arabia as a source of American oil supplies.

It makes the Niger Delta and its people’s struggles against the Nigerian government and Big Oil one of the most strategically important places on earth, and the big powers are wracking their brains to try to ensure that nothing disrupts the flow of West African oil.

A recent report on the future of sub-Saharan Africa, published by the US government think tank the National Intelligence Council, identified the collapse of Nigeria as the most important risk facing Africa today.

“While currently Nigeria’s leaders are locked in a bad marriage that all dislike but dare not leave, there are possibilities that could disrupt the precarious equilibrium in Abuja [Nigeria’s capital],” the report said.

“If Nigeria were to become a failed state, it could drag down a large part of the West African region.”

Amid the deadly ethnic and religious tensions and chronic corruption which pervades all life in Nigeria, the West’s immediate fear is of political meltdown at next year’s presidential and parliamentary elections, which are always studded with violence and communal and regional hatreds.

Last year, at a US-organised security conference in Abuja, General Carlton Fulford, former deputy commander of the US European Command, which includes Africa, called for a coordinated central international security agency for the Gulf of Guinea, with Nigeria playing a significant role.

He did not spell out what military supplies Washington had already sent to Nigeria’s president Olusegun Obasanjo, but he suggested that the coordinating agency should be given radar devices and unmanned airplanes for surveillance of the Delta and offshore oil and gas fields.

In an attempt to quell the rebel groups in the twisting creeks and tangled swamps of the Delta – at 15,000 square miles one of the largest wetlands in the world – the Nigerian army and navy are buying former US coastguard patrol boats. But security experts reckon some 200 such boats will be needed to control the rebels and the “bunkering”.

Bunkering is the widespread rebel practice of tapping into pipelines and siphoning oil into barges, modified to become makeshift tankers, lurking in the mangrove swamps. The tankers ferry the oil to rusting sea-going tankers, registered in Ukraine and Albania, chartered by Lebanese middlemen and anchored offshore. Some 15% of Nigeria’s oil production disappears this way. The whole exercise requires complicity by senior military and government officials who turn a blind eye to the slow passage of the barges from the Delta into the open sea.

By some estimates, this illegal trade is worth more than Colombia’s entire drugs trade. Last month armed groups kidnapped nine foreign oil workers, set pipelines on fire and disrupted a major export terminal. Nigerian oil output is down 20% so far this year as a consequence of rebel attacks.

West African oil is being treated by the US as a major strategic asset. The reserves under the Gulf of Guinea may yet prove to be bigger than anything yet discovered elsewhere. Nigeria alone plans to more than double its oil production from 2.5m barrels a day to more than five million barrels by 2010, and foreign oil companies have investments planned totalling $33 billion.

What makes the whole proposition even more attractive is the fact that Nigeria is nearer America than the Middle East, and the oil is of higher quality – lighter and “sweeter” than that produced in the Middle East.

A major conference by the African Oil Policy Initiative Group, including top US government representatives and business and think tank executives, recommended that Congress declare the Gulf of Guinea an area of “vital interest” to the US and establish a regional sub-command – similar to US Forces Korea – in the region, with headquarters possibly on the islands of Sao Tome and Principe.

“There is a need to reshape a new US national security policy for sub-Saharan Africa based on a West African regional economic engine driven by large petroleum revenues from producing states such as Nigeria, Angola, Equatorial Guinea, Gabon and Congo Brazzaville,” the group concluded.

“Nigeria, especially, as Washington’s largest African trading partner and despite its difficulties with governance and transparency, could emerge as the pivotal actor, regional economic engine and stabiliser. By providing the US and other markets with a steady and secure flow of high-quality, reasonably priced African crude, dependence on hostile or unstable suppliers in other parts of the globe would diminish.”

But to secure this outcome while avoiding some future nightmarish Western military intervention to protect oil supplies, the social crisis of the Niger Delta will have to be solved by non-military means.

At present the five Delta states, the source of all of Nigeria’s oil, receive only 13% of the oil revenues. The rest goes to the central government. The Delta’s 22m people live in dire poverty among widespread pollution, which some allege has been created by companies such as Shell and Chevron. This pollution is said to have had a negative impact on the traditional fishing grounds. The revolt against Abuja grows by the day.

“Nigeria is like a country sitting on a keg of gunpowder,” said Nalaguo Chris Alagoa, who runs the Nigeria branch of the Paris-based conservation movement Pro-Natura International. “The Delta’s resources are what supports the whole country. The fuse is getting shorter and the day it explodes Nigeria will go to pieces.”

During the last quarter century, Nigeria’s leaders have looted hundreds of millions of dollars in oil revenues to foreign bank accounts while per capita income has dropped from around $1000 to less than $400.

Shell and Chevron say that nowadays they run major development projects to help the Delta communities. Shell’s spokespeople say the company spends $60m a year on community development, one of the largest corporate aid projects in the world.

But Africa Confidential recently visited Oloibiri, the small town that hosted Nigeria’s first oil well some five decades ago, and noted: “Oloibiri is a potent symbol of the oil industry’s failures. There is no power or running water in Oloibiri and few visible signs of progress. A clinic and hospital, built by Shell, stands empty for lack of staff and equipment.”

26 March 2006

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