Effect of Nigeria Militancy on Oil Prices

Apart from problems with much talked oil producers Iraq and Iran, the militancy problem in Nigeria is also accounting its share, although little, in the current increase in oil prices. The current article will give an overview of Nigeria’s oil strength and its current status.

Nigeria is the largest oil producer in Africa, the eleventh largest producer of crude oil in the world and a member of the Organization of Petroleum Exporting Countries (OPEC). According to Oil and Gas Journal (OGJ), Nigeria had 36.2 billion barrels of proven oil reserves as of January 2007. The majority of reserves are found along the country's Niger River Delta, in southern Nigeria and offshore in the Bight of Benin, Gulf of Guinea and Bight of Bonny. Nigeria has total production capacity (total potential production capacity if all oil currently shut-in came back online) of three million barrels per day.

Nigeria is the world’s eighth largest exporter of crude oil and the country is a major oil exporter to the United States. In 2006, Nigeria’s total oil exports reached an estimated 2.15 million bbl/d. Nigeria shipped approximately one million bbl/d or 42 percent of its crude exports to the United States in 2006. Additional importers of Nigerian crude oil include Europe (19 percent), South America (7.6 percent), Asia and the Caribbean.

Since December 2005, Nigeria has experienced increased pipeline vandalism, kidnappings, and militant takeover of oil facilities in the Niger Delta. As of April 2007, an estimated 587,000 bbl/d of crude production is shut-in. The militant activity in the Niger Delta (especially near Warri and Port Harcourt) has severely impacted Nigeria’s oil production potential by shutting-in an estimated 20 percent of total production.
As per a report – “Violence in the Niger Delta has reduced Nigeria's total oil production by a quarter in the past two years”.

With the help of new projects coming online, the Nigerian government hopes to increase oil production capacity to four million bbl/d by 2010. The Nigerian Government is also talking steps to curb militancy, but right now nothing could be said in such a volatile situation, lets hope for some good results in the coming future.

Dated : 23rd May 08