A few years ago when the oil supply situation was much tighter, every militant attack on an oil facility in the Niger Delta triggered an immediate jump in oil prices. However, ever since world oil supplies began outrunning demand last fall and OPEC began massive production cuts, nobody outside of the Nigerians and their contractors really cared if the country produced any oil or not. As more production shifted to relatively secure off-shore locations, Nigerian production settled somewhere below 2 million b/d. From time to time a pipeline or pumping station would be sabotaged, but these were usually repaired in short order.
Last week, however, the situation took a turn for the worse as fighting between the main militant group, the MEND, and government forces flared. As usual, the rhetoric soared as the MEND announced the beginning of a bloody civil war and warned foreign oil workers to evacuate from the Delta immediately.
The MEND promptly hijacked a condensate tanker and a cargo ship and took them to a MEND controlled village or militant base, depending on one’s point of view. The government attacked the village, using aircraft and helicopter gunships, killing some militants, dozens of villagers, and at least two of the ships’ crewmen that were being held there. Government forces, aided by 14 gunboats and 4 helicopter gunships, drove off the militants, occupied the village, recovered the ships and freed the remaining hostages.
In retaliation for the attack on the village, the MEND declared all-out war, summoned other militant groups to join them and blew up key pipelines supplying Chevron’s Escravos export terminal and the 125,000 b/d Warri refinery.
Along with everyone else in the oil business, the MEND, which is financed by selling stolen oil, has suffered from low oil prices. However, since its formation 4 years ago, the organization has repeatedly shown its expertise at blowing up scattered and highly vulnerable oil installations. The retaliation for what appears to be a high-casualty attack on a MEND village is likely to go on for some time and further reduce Nigeria’s oil exports. For the immediate future, this flare-up is likely to have little impact on world oil prices. Over the longer run, if the animosity and heavy fighting continues, Nigerian oil production could be seriously damaged.