Nigeria - Significance of the Bonga Attack

NOTE: An updated version of this post is now available at The Oil Drum.

Militant attacks have shut in as much as 345,000 barrels per day of Nigerian oil production in the past few days. One of the attacks was against a facility 120 km offshore, demonstrating a significant new militant naval capability. This may prove to be an extremely important development: 1.25 million barrels per day of new offshore production is scheduled to come online in Nigeria over the next 6 years, and all of it was previously believed to be beyond the reach of militants.

Shell’s $3.6 billion “Bonga” Floating Production, Storage, and Offloading vessel (FPSO), 120km from shore in 1000m deep water, was recently attacked by MEND militants.

Overnight on June 19th, militants from the Movement for the Emancipation of the Niger Delta (MEND) struck Shell’s offshore Bonga facility, resulting in Shell declaring force majeure for deliveries of 225,000 barrels per day in June and July. Bonga, the first and largest Nigerian offshore facility, is 120km offshore. Then, on June 20th, militants destroyed a key Chevron pipeline near Escravos, Nigeria, forcing Chevron to shut-in and declare force majeure on 120,000 barrels per day. This article will analyze the significance of the Bonga attack in light of Nigeria's efforts to grow its offshore oil production.

What is at Stake?

This recent attack is particularly troubling in Nigeria, where a February, 2006 Citigroup report noted that "clearly most of the (oil production) growth near-term looks to be in the Nigerian deepwater and as such should be less subject to current disruptions." While offshore production currently only accounts for 16% of Nigeria’s oil production, it is expected to account for 90% of future growth. MEND has already demonstrated its capability to shut in significant portions of Nigeria’s onshore oil production, and now it is threatening to re-attack offshore facilities, urging expatriate workers to abandon them immediately. Significantly, Nigeria’s onshore production is already mature, and government hopes of raising total production to 4 million barrels per day are entirely dependent on the success of the offshore sector. If MEND can continue to interrupt offshore production, the prospects for any increase in production from Nigeria look dim. The situation in Nigeria is particularly important as Nigeria is one of the few states with the potential to significantly increase both production and exports. The megaproject list on WikiPedia shows 345,000 bpd of offshore production set to come online in 2008 (Agbami field, Oso field); 220,000 bpd of offshore production in 2009 (Akpo field, Oyo field); 220,000 bpd of offshore production in 2010 (Bonga North, Bonga Ullage fields); 285,000 bpd of offshore production in 2011 (Bosi, Ukot, Usan fields); 250,000 pbd of offshore production in 2012 (Bonga SW, Nsiko fields); and 150,000 bpd of offshore production in 2013 (Egina field).

That’s 1.25 million barrels per day of new offshore production planned in the next 6 years. None of it was previously considered vulnerable to attack. Now it all appears to be within the demonstrated reach of MEND.

MEND: Potential for Innovation & Improved Capabilities

This most recent offshore attack also highlights significant development in MEND’s capabilities. Comments as early as 2006 noted that MEND’s offshore capabilities are continuously improving, and that facilities as far as 50-60 km offshore may be at risk. Bonga is twice that far offshore, at 120km.

I predicted a year ago that MEND would increasingly focus on Nigeria’s offshore facilities for two reasons: to differentiate their ideologically-grounded struggle from the privateers and criminal bunkering that is also interrupting Nigerian production; and as a result of the innovation that naturally results from their decentralized structure. While this most recent attack demonstrates MEND’s ability to operate in the deepwater environment, it also shows significant room for improvement. MEND’s press release stated that their goal was to gain access to and destroy the facility's main control room, but that they were unable to do so. Their failure, however, most likely provided MEND with the specifics of what capabilities, training, and equipment they will need to succeed in the future, suggesting that the improvements in capability demonstrated in this attack are part of a larger cycle of capability improvements (an OODA Loop).

The recent attack demonstrates three significant and separate advances by MEND: targeting, naval equipment, and training. By targeting far-offshore infrastructure that was previously considered to be beyond their reach, and by targeting projects that are key to the Nigerian government’s revenue plans, MEND has accurately identified a very high return on investment target. This demonstrates an advancement in their ability to pursue “effects-based targeting”—that is, the ability to carefully select targets for their ability to produce the desired effect. For MEND, the desired effect is to force the Nigerian government to better meet the needs of the Delta peoples. Previous tactics of kidnapping and attacking pipelines were poor choices for several reasons: they spawned criminal activity within the Delta, they increased pollution in the already polluted Delta region, and they did not effectively compel the desired action on the part of the Nigerian government. While it is yet to be seen if the current targeting choices will be more successful, in my opinion they are an advancement in targeting skill on the part of MEND.

The Bonga attack also demonstrates a significant advance in MEND’s ability to operate far offshore. While MEND has always been noted for their riverine naval capability, their demonstration of offshore capability suggests an improvement in naval equipment. No information is available on what types of watercraft were used by MEND in the recent Bonga attack, but at a minimum they have demonstrated that their boats have 120km range.

Additionally, MEND demonstrated a fairly advanced set of navigation skills. Standing in a rigid inflatable boat, at 1.7 meters above the water, the visible horizon is only 5km away. Even if Shell’s Bonga facility flares at 100m above the surface, the flare is still below the horizon at 40km. Reports that the attack commenced at 1 a.m. suggest that MEND has developed fairly advanced offshore and nighttime navigation skills, that Nigeria’s naval presence in the region is not currently capable of protecting offshore facilities, and that all major Nigerian offshore facilities are within MEND’s reach.

Conclusion: Geopolitical Feedback Loops in Action

The recent attacks in Nigeria should be viewed as a product of geopolitical feedback loops. I’ve written previously about these feedback loops in operation in Nigeria, and will begin to reassess and update them in upcoming posts. These geopolitical feedback loops are significantly undermining Nigeria’s ability to deliver on their potential to increase oil production and exports. While it may be tempting to view these geopolitical feedback loops as separate from the geological phenomenon of Peak Oil, it is more accurate to view the geopolitical factors as a direct result of geological peaking—-but for geological factors, disruptions in Nigeria would simply cause oil exploration and production to move to other, equally fertile grounds. Instead, the geological reality that there are very few “geologically fertile grounds for increasing oil supply” forces companies to accept the high costs of doing business in Nigeria.

**Note: for those hoping for a rhizome post this week, I apologize... world events are conspiring against my efforts to write on a non-oil topic. Next week! Maybe...

Nigeria Escalation

Energy Intelligence Note: 9 May, 2007

The situation in Nigeria is escalating--as expected, geologically-driven declines in oil production are spawning geopolitically-driven increases in disruptions from "above-ground factors." The recent attacks on major oil pipelines in Nigeria cut all oil flow to AGIP's Brass Export Terminal, taking a further 200,000 barrels per day off the market. On top of that, take a look at the latest unclassified figures on kidnappings in Nigeria, courtesy of the CIA:

2006:
Total Hostages (Unresolved): 66 (0)
American Hostages (Unresolved): 0 (0)

2007:
Total Hostages (Unresolved): 106 (17)
Amercan Hostages (Unresolved): 17 (5)

And 2007 is only half over! That represents a rougly 200% year-on-year increase in total hostages, and a huge leap in the "value" of these hostages, as reflected by the sudden shift toward higher-skill and western workers, as shown by the sudden prevalence of American hostages.

The coordinated nature of the recent triple pipeline attack suggests that broader, hierarchal organizations such as MEND are alive and well. This doesn't, however, mean that the kind of localized criminal organizations that I spoke of in my recent Oil Drum article on Nigeria are going away. On the contrary, it means that politically-motivated groups such as MEND must now differentiate themselves from the criminal gangs if they wish to put weight behind their political demands. If MEND and criminal gangs resort to the same tactics, there is no motivation on the part of either the Nigerian government or foreign oil companies to cave to MEND's political demands when this won't end the disruption caused by criminal gangs. MEND must pursue increasingly coordinated, high-impact attacks to give them a bargaining chip that is unique, a bargaining chip that is not shared by criminal gangs who won't participate in a cease fire. Logic dictates that differentiating themselves from criminal gangs requires a new targeting focus: offshore oil facilities. MEND has demonstrated a limited ability in the past to operate in the offshore environment. The Nigerian navy is certainly in no shape to effectively counter them. Expect a wave of significant offshore attacks to be the next major development in Nigeria. Offshore facilities are highly vulnerable and minimally defended--consider the destruction caused by mistake or malfunction at the Piper Alpha platform. Now consider how long it takes to repair a major offshore facility in today's economy. An attack on a major offshore facility is the next logical targeting choice, and MEND is at a critical juncture where it must demonstrate its political relevance or fade away as a centralized, unified organization.

A recent commen was right on the money: the geopolitical distruptions caused by geological peaking in oil production may provide exactly the cover necessary to avoid recognition of the geological forces driving these events. It's a challenge to make a scapegoat out of geological reality, but foreign terrorists and resource nationalism are easy marks!

Lessons from Nigeria on US Copper Thefts

Energy Intelligence Note: 16 April, 2007

A month ago I reported on the escalation of infrastructure disruption in Nigeria for The Oil Drum. The key trend that I identified was the shift from measured, politically-motivated attacks under the leadership of MEND (a negative feedback loop) to the financially motivated attacks carried out by a patchwork of profit-driven youth gangs (a positive feedback loop). As part of my conclusion—and probably the part that was taken least seriously—I noted that there is great potential for this same kind of profit-driven infrastructure attack within the US. Increasingly, it appears that this is exactly what is happening with the rising occurrence of copper theft from US utilities. How are these two situations similar, and what lessons from Nigeria are applicable to US infrastructure security?

In the past year, 7 people have been electrocuted while attempting to steal copper from active power lines within the US. In Chandler, Arizona alone, police have reported over 200 calls reported to copper theft, and the local Salt River Project, a water utility, suffered up to $400,000 in damage to their system from theft of copper “backflow-preventer” valves in their water pipes. Just last week, thieves broke in to an electrical substation in Calhoun, Georgia and stole copper components, resulting in a power outage to 1500 people. With the price of copper on the rise—currently over $3 per pound—the rate of copper theft from utilities is likely to continue increasing. Is this similar in any way to the disruption to the oil infrastructure in Nigeria, and what lessons can we learn from that situation?

In Nigeria, politically motivated attacks were previously controlled by two factors. First, they were a means to a political end, and the government could reign in these attacks by offer political concessions. Second, the political organization behind the attacks, MEND, had a vested interest in maintaining the long-term viability of Nigeria’s oil exporting capacity, creating a self-imposed limitation on their attacks. The shift to decentralized, profit-motivated youth gangs has removed these two limiting factors, and the problem is spiraling out of control. Similarly, US copper thefts are neither limited by political concerns nor an awareness of actors’ vested interest in the viability of US utility grids. Finally, just as Nigerian violence creates a positive feedback loop that increases the price of oil, further incentivising profit-oriented attacks in Nigeria, the spate of US copper thefts is a potential positive feedback loop. If authorities attempt to crack down on copper thefts by instituting new controls over the sale of scrap copper, they will increase the cost of legitimate scrap copper sales and drive up the black market price of scrap copper, increasing the incentive to copper thieves.

What lessons can we learn from the infrastructure attacks in Nigeria? While the comparison provides no obvious solutions to the problem of copper thefts, it does provide insight into certain aggravating factors. Nigerian youth in the Delta region are particularly vulnerable to the lure of profit-motivated attacks because of the dire economic situation there. Likewise, while further increases in copper price will drive copper thefts, a recession or other economic factors such as inflation will similarly increase the return on investment for copper thieves. As with the situation in Nigeria, as utilities upgrade facility security in response to copper theft, utility personnel risk becoming the most accessible target—either as a means of gaining access to copper stores, or when they are caught in the crossfire as copper thieves escalate their tactics and violence in response to greater security. Finally, as the return on investment for copper thefts increases, it is also likely that issue-oriented groups such as the Earth Liberation Front will choose copper theft as a way to simultaneously finance their operations and inflict damage on specific industrial utilities or consumers.