THE RENEWED ATTACKS ON OIL PIPELINES
The recent attack on two major oil pipelines belonging to Agip, an oil firm operating in the Niger Delta region, has raised fresh concerns on the success of the Federal Government's amnesty programme.
According to reports, a gang of gun-totting militants in the early hours of October 29, invaded the Agip oil field at Osiama, in Bayelsa State, and blew up the pipelines. The result was a shut in of 60,000 barrels of crude oil per day.
Although the quantity of losses did not necessitate a declaration of force majeure, a term for an unexpected event that renders a company incapable of meeting its contractual obligations to customers, the attack on the facility located in the Brass local government area, has already resulted in a drop in Nigeria's oil production, and by extension, huge revenue losses to the Federal Government.
Nigeria's projected revenue for 2010 is based on 2.2 million barrel per day (bpd). The latest attack is bound to lead to a decline in production and revenue projections for 2011. Of course, the impact on government's revenue profile is one of the far-reaching implications of the attack. Also, the vandalisation of the pipelines will have negative effects on both internal and external balance of payments. The impact on the external account balance could be more telling.
With the Foreign Reserve already in sharp decline in recent months, this incident could cast doubts on Nigeria's capacity to honour it obligations. If the shut in increases and continues for a long period, it might affect the capacity of government to finance next year's budget. The net effect could lead to external borrowing. For a country already reeling from high external debt, this will have an unwholesome effect on the economy.
There is often good reason for alarm anytime there is a disruption of oil production. As the main revenue earner for the country, our fiscal estimates and other expenditure projections are benchmarked on oil production levels and prices in the international market. Attacks on such oil facilities will negatively affect the ability of oil and gas projects in the country to function optimally.
Before the militant attack on the Agip facility, statistics from the Nigerian National Petroleum Corporation (NNPC) and the Organisation of Petroleum Exporting Countries (OPEC) showed that Nigeria's oil production had dropped substantially this year with concomitant effect on revenue generation.
For instance, OPEC statistics reveal that Nigeria's output fell by 85,000 bpd, to an average of 1.94 million bpd in February. This is one of the biggest declines since the Niger Delta crisis became a major national concern.
It is, therefore, disheartening that in spite of the efforts and the olive branch extended to the militants, one of which is the Joint Venture Businesses (JVB) involving 10 per cent of the total oil revenue from the area so that peace can return to the troubled region, attacks on oil installations seem to have resumed.
We have had genuine reasons in the past to question some of government's strategies in the search for lasting peace in the Niger Delta. Our position has not changed. The attack on Agip pipelines strengthens our conviction that the carrot and stick approach is a sensible way forward. While the incentive package in the amnesty deal is not a bad idea, government should not hesitate to rein in recalcitrant militant groups that flout the terms of the programme.
The continued disruption of oil production could jeopardize peace in the region and may force some companies to leave the country. Some may have already stopped production as a result of the incessant attacks.
It is vital that government and those charged with ensuring the success of the amnesty programme retool some aspects of the initiative in line with the exigencies of the time. All stakeholders should be involved in finding a comprehensive and enduring solution to the Niger Delta crisis.
Altogether, the attack on the Agip facility is a rude awakening to the reality that much more needs to be done to make the Niger Delta region a safe place to live and work, in the best interest of all Nigerians.