The Petroleum and Natural Gas Senior Staff Association of Nigeria
While a growing nationwide strike and protests have already paralyzed daily life in Nigeria, the beating heart of its economy — crude oil — keeps pumping.
Now a powerful union says it will shut down all oil and natural gas production Sunday in a nation that remains crucial to U.S. energy supplies. The union’s ability to enforce the shutdown across the swamps of Nigeria’s southern delta to massive offshore oil fields remains in question, though Thursday’s threat of a strike could sway global oil prices as traders worldwide remain concerned about supply.
Nigeria, Africa’s most populous nation with more than 160 million people, has been paralyzed by a national strike that began Monday after the country’s government abandoned subsidies that kept gasoline prices lower for consumers. Overnight, prices at the pump more than doubled, from $1.70 per gallon (45 cents per liter) to at least $3.50 per gallon (94 cents per liter). The costs of food and transportation also doubled.
Popular anger over losing one of the few benefits average Nigerians see from being an oil-rich nation, as well as disgust over government corruption, has led to demonstrations nationwide and related violence that has killed at least 12 people.
The Petroleum and Natural Gas Senior Staff Association of Nigeria, which represents about 20,000 workers, announced Thursday it would “be forced to go ahead and apply the bitter option of ordering the systematic shutting down of oil and gas production” if the government refused to reinstate the gas subsidies. Union president Babatunde Ogun said if fields are shut down, it could take “six months or one year” to restart them.
“We … believe that if everything comes to a standstill, the government will budge,” Ogun told journalists in Lagos.
Ogun also said the natural gas shutdown would turn off the nation’s power grid, which is already in shambles.
The oil industry so far hasn’t felt the effects of the national strike. Many of its operations are automated, both for efficiency and to avoid having staff work in the Niger Delta’s maze of creeks, where criminal gangs and militants target workers for high-dollar kidnappings. Foreign companies also run large offshore fields, far from the streets and chaos of growing demonstrations across the country. Shipments from offshore platforms move immediately to market.
When pressed about how the union could affect the automated parts of the industry, Ogun did not offer an answer.
Most oil firms, including the dominant Royal Dutch Shell PLC, say they are monitoring the situation. Other companies with subsidiaries working in Nigeria include Chevron Corp., Exxon Mobil Corp., Italy’s Eni SpA and French firm Total SA, which operate in tandem with the state-run Nigerian National Petroleum Corp.
Levi Ajuonoma, a spokesman for the state-run firm, said it had not adjusted its production and shipping forecasts over the strike. It would take time for the nation to feel the impact of the strike, as oil and natural gas cargoes go out months ahead, meaning that supply would be available for the U.S.
However, it still could affect futures prices of oil on stock markets — potentially raising the cost of gasoline for the consumer. Global oil prices rose when militants began several years of attacks on oil companies and crude oil pipelines in 2006.
Benchmark oil prices rose by $1.03 to $101.90 per barrel Thursday in electronic trading on the New York Mercantile Exchange. Prices rose on concerns of global supplies.
Nigeria is the fifth-largest oil exporter to the United States, and losing those supplies would force American refineries to replace 630,000 barrels of crude per day.
“As long as government is selling crude … the impact to them will not be that significant,” University of Ibadan economics professor Adeola Adenikinju said. “The fiscal nerve center of the economy has not really been touched.”
The growing protests and attacks from a radical Islamist sect also put additional on a government already facing popular dissent following the removal of the fuel subsidies. Analysts warn that could raise the political risk in a nation with a young democracy and a history of military rulers.
“The subsidy issue provokes such strong emotions because it is viewed as one of the few benefits that Nigerians receive from living in an oil-producing nation,” Barclays Capital said. “If the protests continue or gain momentum, they will pose a major challenge to the Jonathan government and potentially exhaust the capacity of an administration already facing a sustained security threat.”
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