The gas flaring from oil extraction in the Nigerian Delta is so numerous and vast, that at night, in what is otherwise a dark and watery landscape, the pinpoints of light illuminate the region like a city as seen from space.
In the wetlands and fishing grounds on the surface however, the scene is anything but beautiful. For decades, the global oil industry has operated a kind of limited liability venture in the Nigerian Delta. And, in partnership with the dysfunctional government in Abuja, oil extraction has defiled this delicate ecosystem with industrial pollution.
The gas flares themselves inflict their own particular damage, raising the temperatures of villages by as much as 10-15°F. Over the years, an insurgent group known as MEND, the Movement for the Emancipation of the Nigerian Delta, has responded by attacking and sabotaging this oil and gas infrastructure.
These attacks have been particularly frequent the last few years. They have also been effective. As of this week, it is being reported that 600 kb/day of Nigerian production has been halted in just the last 60 days. This has knocked domestic supply down to critical levels. Assuming Nigeria maintains all current export commitments, it is not unthinkable that fuel shortages could appear before Summer is over.
There is however an additional insult to all of Nigeria and not just the delta. Not only has 600 billion dollars worth of oil flowed out of the country since production started 50 years ago (with precious little to show for it), but, even today Nigeria must import refined gasoline to fulfill domestic demand. Given that production has now been pounded down to 1.3 Mb/day–a level that is half this decade’s high–this is going to crush net revenues (after gasoline imports) to the government in Abuja. I believe that MEND knows exactly what it’s doing.
An interesting nexus of events unfolded back in the Spring of 2004, when Moscow began its attack on Yukos, and the price of oil finally rose above 40 dollars a barrel. In my view, a number of oil producing nations, and groups within those nations, began to act with a new awareness of their power. I call them The Oil Actors. And they seemed to understand that the era in which only Saudi Arabia controlled the price of oil had effectively come to an end.
At that point, in the new era of tight supply, even the smallest oil producing nation could affect the global oil landscape. It seemed to me then, just as now, that MEND understood it could affect the price of oil as well.
As an oil actor, MEND now controls the marginal oil supply of Nigeria. They have proved that reality beyond any doubt. But what’s also true is that Nigeria as a producer of very high grade oil has some control over the marginal supply of global Light Sweet oil, which has become rarer and dearer in an age of declining grade quality. Light sweet commands a premium. It can be refined quickly, and more easily. In fact, Nigeria has traditionally sent its light sweet oil straight across the Atlantic, to the United States. MEND, therefore, has uncovered its own control over a very important lever.
Because Nigeria is such a densely populated nation–it frankly still shocks that 150 million people inhabit the country–MEND does not represent the typical small, oppressed sub-population. No, the population of the Delta tops 31 million. A small nation in its own right.
And while it’s regrettable that some oil workers have lost their lives in the troubles of the delta, how does one begin to quantify the serial and chronic impact that a half-century of environmental destruction has wrought on millions of people? It’s time to channel one’s inner revolutionary and admit that MEND actually makes sense. Whether one sees them as heroic, clever, or rather up to date with their email and press releases, they are definitely among the world’s most effective oil actors.