Saturday, October 22, 2016/ 9.25pm /BMI Research
BMI View: The growing number of militant groups in the Niger Delta makes the chances of a settlement between the government and militants increasingly slim, compounding our view that oil production will underperform its potential.
Over H116 Nigeria's oil production was constantly hampered by disruptions to pipelines and loading terminals. However, despite the gloomy headlines of crude production falling to multi-year lows, output has remained somewhat resilient.
The Nigerian National Petroleum Corporation's (NNPC) most recent petroleum report has revised up production figures for the first five months of the year. While Nigeria's production fell from 2.15mn barrels per day (b/d) in January to below 1.7mn b/d in May, average production for the first five months still stands at 1.96mn b/d, above our forecast of 1.7mn b/d for 2016.
While production in the first four months of 2016 was impressive considering the widespread disruption to crude flows in the Niger Delta caused by an aggressive militant insurgency, the fall to below 1.7mn b/d in May is more reflective of the output we expect over the coming months.
For example, in July the NNPC released a document listing five crude grades which are either under force majeure or have had disruptions to loading schedules. These include Bonny Light, Brass, Escravos, Forcados and Que Iboe. We expect disruptions to production to continue as we see little chance of the situation resolving.
The majority of attacks so far have been claimed by the group calling itself the Niger Delta Avengers (NDA), which has refused to come to the negotiation table with the Nigerian government.
More worryingly for Nigerian government is the growing number of separate groups which are cropping up, claiming self-autonomy and issuing threats to attack petroleum instillations. These include;
• The Reformed Niger Delta Avengers, a breakaway section of the NDA.
• The Niger Delta Greenland Justice Mandate (NDGJM), which focuses its operations in the northern areas of the delta and Ijaw, issuing a warning to all Federal Government and international oil companies to evacuate their personnel.
• The Joint Niger Delta Liberation Force, which unlike its contemporaries has threatened to not just attack facilities but also government troops sent to secure the region.
• The Niger Delta Justice Defence Group, which claimed responsibility for the August 4 attacks on the oil pipelines in the Bera Gokana area of the Rivers state.
• The Niger Delta Revolutionary Crusaders, which has declared its solidarity with the NDA and willingness to support it in its aims.
• The Ultimate Warriors of Niger Delta, which threatened attacks on oil and gas facilities unless the government awards 60% of oil blocks to the local people.
• The Reformed Egbesu Boys of the Niger Delta, Egbesu Red Water Lions and Egbusu Mightier Fraternity, which have all agreed to hold talks with the government.
The growing number of militant groups in the delta that are actively opposed to the government and the presence of oil companies operating in region compound our negative outlook for Nigeria's oil production.
The task of negotiating any sort of settlement or truce is increasingly difficult as different groups have varying agendas and often do not get along with the other groups, especially those which have splintered off.
With the chances of a universally accepted settlement looking slim, it is likely that sabotage operations in the delta will continue, hampering production efforts and severely capping Nigeria's potential.