In Nigeria, MEND Is No Fix

Just a few days after calling for a way to track "blood oil" stolen from African producers, Nigerian President Umaru Yar'Adura faces a serious round of bloodletting in the Niger Delta. On Friday, the Movement for the Emancipation of the Niger Delta (MEND), an opposition militant group, warned oil companies to remove personnel from their installations in the wake of clashes with government forces.

Addressing a group of extractive-industry experts last week, Mr Yar'Adura asked if it were possible to add a chemical marker to crude oil so as to determine its origin. An estimated 10% of Nigeria's daily oil production is stolen and laundered on the international market, which accounts for a loss of $400b in government revenue since the 1970s. Profits from the siphoned oil (currently valued at around $20m each day) fund militia groups in conflict areas and fuel government corruption.

Africa has seen this problem before. For years, the international market was riddled with conflict diamonds used to finance rebel groups in Angola, Sierra Leone, and Liberia. Beginning in 2000, Southern African diamond-producing states began to establish an international certification scheme that would help track diamonds from extraction to distribution. Most analysts estimate that the current market share for conflict stones has fallen to a fraction of one percent from nearly 15% in the 1990s.

Oil stocks have proven much more difficult to trace. Transport tankers often change hands hundreds of times en route to their destination, and crude oil is quickly refined into the more useful petroleum gas, diesel, and kerosene.  In the mangrove swamps of the Niger Delta, organized militias load stolen oil onto barges that strike black market deals with ships waiting in the Gulf of Guinea. Payments for such contraband are regularly made in cash (used to pay off government officials) and weapons (to further embolden the smugglers).

Last week MEND declared an "oil war" against the Nigerian government, and has engaged in several attacks on major extraction facilities in the region. The group's spokesman Jomo Gbomo claimed that the hostilities were in response to a shootout with the government's special military Joint Task Force (JTF) in the Elem-Tombia district. Mr Gbomo also stated that MEND forces had fully destroyed the Royal Dutch Shell Plc flow station on Sunday night. The Alakiri facility was targeted by fighters in speed boats with rocket-propelled grenades, a harrowing sign of rising tensions in the Delta.

Since 2006, such rebel attacks have cut Nigerian oil exports by 20%. The country has a wealth of fossil fuels (300 billion barrels of crude and 187 trillion cubic feet of natural gas), but has struggled to maintain steady supply on account of MEND and other militias. In fact, Nigeria is the continent's leader in hydrocarbon reserves, but problems in the Delta have moved trade south to Angola, currently the largest oil exporter in Africa. 

Shell announced last week that the corporation would extend its force majeure on Bonny light (the high grade Nigerian crude from the Delta basin). This legal clause, enacted back in July after sabotage of the Nembe Creek pipeline, allows Shell to miss contracted delivery schedules on account of circumstances beyond their control. Oil companies in the region are trying to limit the number of casualties they sustain by "down-manning" any facilities that might face rebel attacks. Both measures signal apprehension from extractors that paints a gloomy picture for investors and the Delta region.

Back in mid-August, MEND made headlines for an all-too-uncommon gesture. The rebels orchestrated the rescue of two German hostages who had been kidnapped by rival militants in July. According to reports, an elite commando unit extracted the Julius Berger Plc employees and handed them over to government officials in the Delta. Initially, MEND had hoped the operation would win them the opportunity to speak with their imprisoned leader, Henry Okah. After such a deal was denied, MEND nevertheless carried out the rescue for humanitarian concerns (one of the hostages was severely injured).

Many analysts commented that such behavior might be a sign of changing tactics by MEND. Others hoped that the rescue would initiate some sort of goodwill exchange between the rebels and government forces, perhaps easing tensions in the region. Instead, it seems MEND was intent on demonstrating its remarkable power in the Delta. The Nigerian government is reminded that stability in the oil-industry hub of Port Harcourt is entirely dependent on coöperation from MEND. The rebel group may well use this leverage to extract political and economic concessions from a government they regard as oppressive.

Less than 10 days ago, Mr Yar'Adura returned from Saudi Arabia after receiving medical attention for a health scare. With secrecy still shrouding the trip, government supporters can only hope he benefitted from the best care. The Niger Delta is not for the faint of heart.