FT Report on Nigeria

7/31/2019 FT Report on Nigeria

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NIGERIAOil &GasFINANCIAL TIMES SPECIAL REPORT | Tuesday July 24 2012

www.ft.com/reports/nigeria-oil-gas-2012| twitter.com/ftreports

Inside this issue

FlaringVolumes ofgas burntoff into theatmospherehave fallenbut Nigeriais still theworlds biggest flarer afterRussia Page 2

Local groups Theemergence of homegrowncompanies has bigimplications for productionPage 2

Gas Poor domestic pricinghas held back development,but things are beginning tochange Page 2

Bunkering Towns in theNiger delta are at the heartof a thriving trade in stolenoil Page 3

Petroleum Industry Bill

Analystswho haveseen thelatestversion ofthe bill sayvestedinterestsappear to

have diluted its goalsPage 4

Multinationals An end toviolence in the delta hasbeen welcomed, but thereare other problems tocontend with Page 4

Environment Long-termdamage in Ogoniland is stillto be rectified Page 6

Amnesty Militants have putdown theirarms inreturn forpayment,but thedeal may

have set adangerousprecedentPage 7

The oil and gas industryis booming across sub-Saharan Africa.

To the east, large newd is co ve ri es h av e b ee nannounced in Mozambique,K enya and Tanzania, whileUganda is close to starting com-mercial production of crude.

On the opposite side of thecontinent, oil has been struckoff the coasts of Sierra Leone

and Liberia, raising hopes theycan emulate G hana, wherepetroleum began flowing in2010.

The accompanying excitementis understandable, both for thecountries, for whom the loom-ing windfalls are potentiallytransformative, and for theexplorers and producers, whichstand to make large profits.

But, in terms of the scale ofresources, the new kids on theoil block have nothing on theregions hydrocarbon grand-daddy: Nigeria.

Despite more than 50 years ofproduction, and minimal explo-ration in recent years, Nigeriastill has proven reserves of morethan 37bn barrels of oil nearlythree times more than Angola,its nearest challenger.

Nigerias sweet, light crude isalso of the highest quality, andfetches top prices on interna-tional markets.

Natural gas reserves of about

1 90 tn c ub ic f ee t a re a ls ounrivalled on the continent.

Wh en y ou l oo k a t t heresources, oil and gas compa-nies should be having a love

affair with the country, saysDuncan Clarke, head of petro-leum consultancy Global Pacific& Par tners, and author of

Africa: Crude Continent. Butthey are not. Nigeria is sleepingwhile the other countries aregetting on with it.

Despite the long-desired goalof producing up to 4m barrels ofoil a day, Nigerias output isstill only between 2m and 2.5mb/d, r oughly the same as adecade ago.

Deep-pocketed multinationals

such as Shell, ExxonMobil,Chevron, Eni and Total are allon the ground or offshore, yetinvestment in maintenance andexploration is dropping.

The government has not helda licensing round for five years.

There are numerous reasonsfor the malaise, including inse-curity in the Niger delta region,corruption, and the dysfunctionof the state-run oil company,Nigerian National PetroleumCorporation (NNPC). But themain obstacle to growth in theoil and gas sector has been regu-latory uncertainty.

Legislation designed to intro-duce sweeping changes to theindustry, including fiscal terms,

h as b ee n s it ti ng w it h t hegovernment for four years with-out ever being approved.

Oil companies have refused tocommit fresh money to existing

and prospective projects as aresult and stagnation has set in.

Bayo Odubeko, a partner atthe law firm Norton Rose, whohas extensive experience in oiland gas transactions in Nigeria,estimates that the country haslost $40bn in potential onshorea nd o ff sh or e i nv es tm en tbecause of the lack of clarityabout the legal framework.

But the cost of the failure toreform the sector and stop therot in the related state institu-tions extends far beyond

stunted oil production andmissed signature bonuses, andhas even touched on the coun-trys stability this year.

Just as the NNPC has been

mismanaged, so the four refiner-ies mandated to supply thedomestic market with petrolhave been neglected and operatewell below 50 per cent capacity.The demand for imported fuelhas soared, and with it the scaleof corruption, since Nigeriaheavily subsidises petrol at thepump and mak es lar ge pay-ments to oil marketers whobring in the refined product.The cost of the subsidy alone in2011 was $16bn by some esti-mates.

When Goodluck Jonathan, thepresident, tried to abolish thesubsidy in January it caused anoutcry and a nationwide strike,and he was forced to backtrack

and partially remove it. Therationale for getting rid of thesubsidy may have been clear,b ut s o w as t he p ub li c sresponse: clean up the oil sectorfirst before inflicting pain on us.

Mr Jonathan appears to havelistened. He set up multiplecommittees designed to speedreform.

The most crucial of those arerelated to the Petroleum Indus-try Bill (PIB), the wide-ranginglegislation that is intended,among other things, to intro-

duce a tax and royalty regime,increase the participation oflocal pr oducers, stimulate

Law set to be a game-changerExperts say legislationfalls short of its aims,but investors willknow where they are.reports Xan Rice

Continued on Page 7

Hands on: a Nigerian man shows his oil covered hands near an abandoned well. Nigerias output is still only between 2m and 2.5m b/d, roughly the same as a decade ago AFP

Page 3

Billions in oil revenueis controlled by acartel that touchesthe armed forces,says PatrickDele Cole

Grand theft


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2 FINANCIALTIMES TUESDAY JULY 242012

Nigeria Oil & Gas

When it comes to explain-ing his mission, AustinAvuru does not pull hispunches. We believe wereleading a revolution, hesays.

The claim may smack ofhyperbole, but change isclearly in the air. Mr Avuruis chief executive of Seplat,a small Nigerian oil com-pany that symbolises thenew confidence of the coun-trys fast-growing localoperators. The climate forindigenous companies isbetter than its ever been,the geologist and petroleumengineer says.

The homegrown oil sectoris still small, with localindependents accounting

for just 100,000 barrels a dayof production less than 5per cent of the countrysoutput. Much of that is infields operated by largercompanies.

But the figure is expected

to grow, driven partly bygovernment policy aimed atputting an expanding shareof output into domestichands, and moves by thewestern majors to divesttheir matur e, onshorefields. I expect indigenous-oper ated production toquadruple by the end of next year, if all the othersfollowing in our footstepsachieve what we have, MrAvuru says.

The emergence of compa-nies such as Seplat has bigi mp li c at i on s . O sm anShahenshah, CEO of Afren,an Africa-focused independ-ent, says Nigeria still has9bn barrels of oil reservesleft to produce onshore andin its shallow waters areas the majors consider

mature or too difficult todevelop. If the smaller com-panies take them over, hesays, output could rise from2.5m b/d to 4m b/d, makingit the worlds sixth largestproducer.

M r S ha he ns ha h s ay slocals are becoming morealive to that opportunity.There seems to be a genu-ine desire to develop a realoil sector in Nigeria thatsnot just the preserve of thef iv e m aj or s, h e s ay s.Local companies are mak-ing real investments, organ-ising themselves to list inLondon and Singapore andtaking a longer-term view.

Sceptics say, however,predictions of a domestic oilboom have never pannedout. The whole process ofgiving indigenous compa-nies more access has beenvery slow, says DraganTrajkov, an oil analyst atRenaissance Capital. Eve-ryones dissatisfied, and hasbeen for a long time.

The authorities firstlaunched the indigenisationpolicy in the early 1990swhen, for the first time,l ic en ce b lo ck s w er eawarded to local companies.But most of these wer e

small outfits that typicallysold stakes in the blocks toforeign groups for big signa-ture bonuses, and playedlittle role in operations.

In 2004, the governmentassigned 30 marginal fieldsthat the majors had failedto develop, bundling theminto 24 contracts and auc-tioning them off to localentities. By 2010, however,only about six of them werein production.

A big problem was localcompanies inability to raisesufficient funds to developthe assets.

Its a constant battle toget the kind of capital werequire, says Wale Tinubu,CEO of Oando, one of thebiggest local groups. Ourenterprise value is $1.2bn,

but weve only been able toraise $260m of equity sincewe started the business.Oando has been forced torely on short-term loanscharged at 18 per cent inter-est, he says.

For some, the solutionhas been to team up with

wealthy foreign companies.That has advantages forboth sides: the local groupsget access to long-term capi-tal, while the foreigners cantap vast r eserves whilecomplying with strict localcontent rules.

Seplat is a good example.It was formed in 2009 whentwo small local producers,

Platform and Shebah E&P,came together to try toacquire some of Shellsonshore fields.

To boost their financialmuscle, they brought inMaurel & Prom, the French

oil company, which took a45 per cent stake in theirnew vehicle, Seplat. It wasa near perfect fit, says MrAvuru.

Maurel & Prom has sub-stantial onshore experiencein Africa and the right cor-porate governance frame-work, he says, while Shebaand Platform had the locale xp er ti se a nd a s ma lldomestic production base.It was much easier for thefused entity to raise fundsand put together a technicalteam. Ever since, he says,others have been trying toreplicate our model.

A deal was finally struckin 2010, with Seplat acquir-i ng s ta ke s i n t hr ee o f Shells Niger delta licences.Since then, it has mor e

than doubled productionfrom the proper ties, to43,000 b/d. Shell went on tosell its stake in anotherblock, O ML26, to localgroup First HydrocarbonNigeria (FHN), an affiliate

of Afren. Last year it soldits stake in another block,OML42, to Neconde Energy,a local consortium.

B ut S ep la t, F HN a ndNecondes success has beenthe exception rather thanthe rule. Shells decision torun auctions for its remain-ing blocks slowed its divest-ment programme. And thebidding process proved con-troversial: Conoil, anotherbig local group, tried andfailed to buy Shells OML30block last year for $1.1bn. Inthe end, it was acquired inJune by another Nigerianoutfit, Shoreline NaturalResources, backed by theUK-listed explorer HeritageOil, for $850m.

Shells negotiations withpotential buyers were com-

plicated by the desire of itsjoint venture partner, theg o v e r n m e n t - c o n t r o l l e dNPDC, to take over the roleof operator in the fieldsShell wants to sell a con-dition that Conoil rejected.

Local oilmen hope thePetroleum Industry Bill willgive a fresh boost to indi-genisatio n an d s ogive locals preferentialrights to acreage. The pro-posed reforms of NNPC willalso help.

We will get a national oilcompany that will be com-mercialised and [publicly]listed, with which well beable to do joint venturesand co-finance projects,says Mr Tinubu.

With the bills passageincreasingly likely, the out-look for local independentsis improving, says Mr Tra-

jkov. The PIB has been areal catalyst [for indigenisa-tion], he says. This yearits looking much better.

Legislation suggests better prospects for local groupsIndigenisation

Guy Chazan finds anew confidence inhomegrown

operators

Laying a gas pipe-line in the middleof Lagos, Africasmost populous city,

is not for the faint-hearted.Plans of the citys under-ground wiring and plumb-ing are often misleading, soholes are dug in the wrongplace. Ther es a lot of improvisation, says WaleTinubu, chief executive of

Oando, one of Nigerias big-gest oil groups.

But the chaos did not stopOando building a 100kmpipeline system that is

delivering natural gas to120 companies in a city thataccounts for 60 per cent ofNigerias industrial capac-ity. The pipe has enabledcustomers to replace expen-sive diesel generators withgas-fired power plants andreduce their energy costs bymore than 50 per cent.

Oando is one of the firstp ri va te c om pa ni es i nNigeria to pipe gas directlyto consumers, a job that hastraditionally been the pre-serve of the federal govern-m en t a nd t he w es te rnmajors. Already the largestfuel distributor, it is emerg-ing as a big gas supplier. Ithas just completed a secondpipeline system in the east

o f t he c ou nt ry , w hi chinvolved nine river cross-ings, and has a third oneplanned for the south.

N ig er ia s it s o n t he

w or ld s n in th l ar ge streserves of natural gas about 180.5tn cubic feet,enough to meet the EUsneeds for 11 years. But ithas been slow to exploitthis valuable resource. Fordecades, much of the gas itproduced in the course ofextracting crude oil wassimply flared burnt orvented into the atmosphere.

Later, it built one of theworlds largest liquefiedn at ur al g as p la nt s o nBonny Island near Port Har-court: the plant, NLNG,exports 22m tonnes a yearof supercooled gas to inter-national markets. Nigeria isnow the largest producer inthe Atlantic Basin, with 8

per cent of global sales lastyear. But little of its gashas been developed for thedomestic market. Nigeriahas a huge gas resource,

says Phillip Ihenacho, CEOof Seven Energy, a fast-growing indigenous gasgroup. It should be using itdomestically instead of exporting it.

Because it has failed toexploit the gas for domesticuse, and particularly inpower generation, Nigeriah as a mo ng t he l ow es tenergy consumption ratesper capita in Africa. It hasbetween 3.5 and 4 gigawattsof installed power capacityworking at the moment,compared with 8GW in NewYork City alone, accordingto one foreign executive.The gap between powers up pl y a nd d em an d i nNigeria is larger than any-

where else in the world,Mr Ihenacho says.

Previously, investorswere deterred from develop-ing gas reserves because of

poor domestic pricing.But that is beginning to

change as the authoritiesprivatise the power sectorand move to liberalise gasprices. The governmentknows it will have to har-ness the private sector tofill the power generationgap, says Mr Ihenacho. To d o t ha t i t n e ed s t oimplement a pro-privatesector regime. If that comesoff, it will be one of the big-gest opportunities for thepower sector in the world.

Founded in 2004 as a divi-sion of Weatherford Inter-national, the oil servicesc om pa ny , S ev en w asbought out by managementthree years later and has

since established a strongposition as one of the fewindependent gas producersin Nigeria.

It has two gasfields in theNiger delta Uquo andStubb Creek and plans tocreate a local network ofgas-processing and trans-portation facilities in theregion, capable of deliver-ing more than 1tn cubic feetof reserves. It has enteredgas sales agreements withpower plants and built pipe-lines to supply them.

Oando has gone a stepfurther and started buildingpower stations. Its first wasfor the Lagos Water Corpo-ration, a small, 12.15MWplant backed by the WorldBank that is connected toOandos Lagos pipeline sys-tem. It has both a socialand commercial return,because it helps to providewater to the city, reducingthe risk of waterborne dis-eases, Mr Tinubu says.

While domestic gas infra-structure is improving,Nigeria also has plans toexpand its export capacity.

T he p ar tn er s i n N LN Gintend to build a seventhtrain, as the liquefactionfacilities are known, onBonny Island. There areplans for another plant,Brass LNG, backed by ENIof Italy, ConocoPhillips,Total of France and thes ta te c om pa ny N NP C,which will be built near theBrass oil terminal on thecoast. Another project,Olokola LNG, is backed byShell, Chevron and others,

but is still far from sanc-tion.

But Brass LNG was origi-nally designed to sell largevolumes of gas to the US.That reckoned without theNorth American shale gasboom that has turned theUS from a gas importer toan exporter. It is unclearinto what market Brass willnow sell.

There are also fears thattax and other changes to beintroduced in the Petroleum

Industry Bill could makebig investments in LNGprojects uneconomic espe-cially at a time when sev-eral gas liquefaction devel-opments around the worldare competing for the samepool of funding. You needto create the right condi-tions for exports to be com-petitive, especially againstthe backdrop of reducedLNG imports into the US,says Ciro Antonio Pagano,ENIs head of Nigeria.

Slow to exploit power supplyGas

But privatisationis starting tochange things, saysGuy Chazan

Gas exporter: Bonny Island, near Port Harcourt, sends 22m tonnes a year of LNG abroad AFP

Flaring: a practice that persists, despite initiatives and best intentions

Uchenna Ekwem has learnt to live withthe gas flares but they are a constantirritant.It stings your eyes, and stainsyour shirt black, the 19-year-old says.When the rain falls, we cant drink thewater.

Oil companies in Nigeria still burn offmuch of the natural gas that comes upwith the oil they produce a practicebanned in many other countries.Nowhere is it more visible than inEbocha, Uchenna Ekwems village,where the Italian company ENI hasbeen pumping crude since the 1960s.A collection of tin shacks about 100kmnorth-west of Port Harcourt, Ebocha is

overshadowed by two flare stacksburning day and night.Villagers complain of respiratory and

skin diseases, of the constant noiseand heat from the flames and acid rainthat corrodes their rooves.

Governments Nigerias included have long understood the need toeradicate flaring. As well as being aserious source of climate-warminggreenhouse gases, it is also a hugewaste of resources. According to WorldBank statistics, more than 150bn cubicmetres (bcm) of gas are flared andvented annually around the world. Theannual 35 bcm of gas flared in Africaalone is equal to half the continentspower consumption.

Since the launch of a huge liquefiednatural gas plant on Bonny Island inthe 1990s, Nigeria has been exportingsome gas. Satellite data collected bythe National Oceanic and AtmosphericAdministration in the US, shows itsflared volumes fell from 16.3 bcm in2007 to 14.6 bcm in 2011. But it is stillthe worlds worst flarer after Russia.

Campaigners say companies should

be using the gas to power localcommunities. People complain that, inthe premises of the oil companies,they have electricity round the clock,but in their homes there is darkness,says Inemo Saniama of StakeholderDemocracy Network, a local NGO.

But despite repeated initiatives, ithas persisted. Flaring dipped duringthe wave of violence in the delta overthe past decade as militant attacksforced oil companies to curb onshoreproduction. Since an amnesty thatencouraged the rebels to lay downtheir weapons, production is back up and so is flaring.

NGOs place most of the blame onthe government rather than the majoroil companies. It set a 2008 no flaredeadline, but failed to enforce it. Andthe state-controlled Nigerian NationalPetroleum Company, which dominatesall joint ventures with foreignproducers, rarely comes up with itsshare of financing for reductionprogrammes.

The majors say they are committedto stamping out the practice. ENIstarted harnessing associated gas in1985 at its Obiafu Obrikom facility,reinjecting it to improve oil recovery.Later, it began using the gas at itsremote flow-stations to power pumps

in its oil wells.But by far its most ambitious effort

is its Okpai power plant, It is 16kmfrom Kwale, a facility that collects oilfrom nearby wells and separates itfrom the associated gas. The gas isthen piped to Okpai, on the Niger

River, which supplies 480 megawattsof electricity to the national grid.

The logistical difficulties posed bybuilding such a plant deep in themalaria-infested jungle were huge.

ENI spent $471m on the project, andoperational costs are high: constantbreakdowns of the national griddamage components, necessitatingregular overhauls that cost $60m atime.

But Okpai is crucial to ENIs plans.The company says it is flaring 15 percent of the gas it produces, down from31 per cent in 2007. It hopes to getthat down to 5 per cent by 2014.

Shell has also made big strides. In2000 it started installing gas-gatheringinfrastructure at sites across its areaof operations. But the uprising in thedelta intervened and 18 of the facilitieswere either vandalised or notcommissioned. In May 2010, Shellrevived the programme, repairing sitesand starting work at 17 new ones. Shellsays that between 2002 and2010, flaring at its SPDC joint venturefell by more than 60 per cent.

Like ENI, Shell has also branchedinto power generation. In 2008, SPDCstarted producing electricity from theAfam VI plant to provide power formillions of people in the delta.

Mutiu Sunmonu, Shells Nigeriacountry chairman, says the companyhas approved a $4bn-plus projectdesigned to fix the remaining siteswhere gas is flared. In five years time,our flaring performance will be one ofthe best in the world, he says.

NGOs acknowledge improvementsbut think more should be done.Edward Obi, head of a group calledGas Alert, points to the flares at

Ebocha as proof the problem remainsacute. Oil companies are makingefforts to harness the gas, he says.But whether enough is being done,Im not sure.

Guy Chazan

Government policyis aimed at puttingan expanding shareof output intodomestic hands

Women sit near a gas flare fire


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FINANCIALTIMES TUESDAY JULY 242012 3

Nigeria Oil & Gas

It seems the Nigeriangovernment is finallywaking up to the financialimpact illegal theft andsale of crude oil is havingon our nation, as well ason the oil producing Nigerdelta region.

Last month the ministerof finance said she believesup to 17 per cent of thecountrys production waslost in April. This meanswe could be losing up to400,000 b/d.

About $9bn of revenue,equivalent to almost athird of the Federalbudget, is thus under thecontrol of a criminal cartelwith tentacles that stretchfrom the Niger delta,through the armed forcesinto the heart of organisedcrime and out into the restof the world.

After years of ignoringthe fact that we losebillions of dollars everyyear, it is a sign ofprogress that thegovernment isacknowledging the scale ofthe problem andannouncing steps to tackleit.

Unfortunately, when wetake a detailed look at thestructures behind oil theftand the amounts of moneyinvolved, the scale of thechallenge becomes clearand the ability of the

government to deal with

this issue alone is calledinto question.

The taskforce announcedby the minister ofpetroleum consists ofrepresentatives from theinternational oilcompanies, the armedforces and the government.They have been mandatedto identify ways to dealwith the issue. But there isa problem built into thisattempt at a solution.

How can we expect ourarmed forces to proactivelyseek to put an end to atrade that makes many intheir ranks rich? Fouryears ago I wrote: It is

said in the Nigerianmilitary that you willnever find a poor admiral.

If anything, the situationhas worsened since thattime. The Niger delta isnow a much sought-afterposting in the military.

It is also questionablewhether the governmenthas understood the level ofresources required and theaction necessary to havean impact. Oil theft isfacilitated by the people ofthe Niger delta becausethey do not have analternative. Real andvisible development is apre-requisite for this tochange, but it will taketime, effort and hugeresources. The resourcesavailable to those involvedin oil theft areastronomical and must bemet with an equalresponse, backed by

political will.

We need to look beyondour borders for help thatcan make a difference. Therecipients of the stolen oil

are refineries in easternEurope, Africa, Asia andperhaps even the US. Themoney used to finance thelargest transactions movesfrom bank to bank in theseregions. This money can,and should, be tracked.The mechanisms existalready throughantiterrorism and moneylaundering legislation. Ifwe can make it moredifficult for oil theft to befinanced, we can begin tomake progress towards along-term solution.

The scale of the theftmeans that large ships areused to transport stolen oilto the refineries thatprocess it overseas.International governmentsown and control thesatellite trackingtechnology that canprovide the evidence toprove complicity. They

should provide the

government andinternational securityorganisations with accessto this tool.

The end user of the fuelthat is refined is often thewestern consumer who,while struggling withausterity, is also consciousof the origin of theproducts that he or shebuys. We must raiseawareness of the scale andconsequences of oil theftand seek to turn thediscerning consumer intoan ally.

In my village inAbonnema, the social andenvironmental impact ofoil theft is obvious andimmediate. The constant

sheen of oil on the surfaceof the river, the boats linedup on its shores that havebeen arrested by the

taskforce for being outsidetheir approved window of

operation and thedistressing lack of girlsover the age of 14 insecondary educationbecause they are pregnantwith the babies of soldiersare just some of the ways

in which this trade has animpact on our society andenvironment.

The lack of development

in the delta, the impact ofthe oil industry on theenvironment and the socialdecay associated withpoverty and conflicts havebeen debated for years.What is less clear tointernational audiences isthe fact that oil theft sitsat the centre of theseproblems. The socialimpact on young menoffered immediate richesover education is obvious.The riches are offered bymilitant groups. Theenvironmental damage inthe delta is known

worldwide, but cleaning upthe region today ispointless without a policyto end the theft that

contributes significantly tothe damage done. What iscleaned up today will bespilled again tomorrow.

If you are able to tackleholistically the issue anddemonstrate the politicalwill and desire for a long-term solution, then acampaign that seeks to endthe illegal trade of oil,combined with a genuineprogramme ofdevelopment, can providethe foundation for asolution that has a chanceof working. Tracking themoney and the ships are

just the first weapons wehave in our armoury, wemust work together todevelop others while

ensuring that our ultimategoal, development, isachieved.

We need the rest of theworld to provide thesupport, pressure and thetargeted solutions that areneeded. We have to stopthe theft.

Patrick Dele Cole is abusinessman and politician

from Rivers State. He was afounding member of theruling PDP party and aspecial adviser to PresidentOlusegun Obasanjo between1999 and 2001.

The buccaneering spiritthat characterised the earlydays of the Niger deltasinteraction with global com-merce has returned with avengeance. Towns such asAbonnema founded in thelate 19th century on a riverisland by a string of war-lord chiefs whose wealthoriginated in the slave andlater palm oil trade are atthe heart of a thriving tradein stolen oil that is costingthe state and multinationalcompanies billions of dol-lars in lost revenues.

According to Ngozi Okon-jo-Iweala, the finance minis-ter in charge of economicpolicy, oil theft led to a 17per cent fall in official salesin April, or about 400,000b/d. That is a quantityentering world markets ille-gally that is greater thanofficial production in all buttwo sub-Saharan Africanproducers, Angola and

Sudan.At the April aver age

world price of $121 per bar-rel, this implies a loss of$1.2bn a month.

Ms Okonjo-Iweala saysthat, together, theft frompipelines and wellheads andfraud in the allocation of acontroversial fuel subsidymay have cost the state$14bn in 2011.

Because of its illegalnature, there are no consist-ent estimates for the scaleof bunkering a termused elsewhere to refer tothe supply of anchor edships, which in Nigeria hasbeen corrupted to describethe trade in stolen oil. How-ever, the finance ministryfigures for April illustratewhat oil companies, stateagencies and inhabitants ofthe delta all say has been asurge over the past year.

In 2011, the state agency

r eg ul at i ng p i pe li n esr ecorded 4,468 pipelinebreak-ins compared with anaverage 1,746 between 2001and 2010. Inhabitants ofAbonnema, just one townwhere bunkering is thriv-ing, say that a growingnumber of people are impli-

c at ed i n o ne w ay o ranother. Every family hassomeone involved, saysone young businessmanwith peers in the trade.

Deploying the navy andarmy, as President Good-luck Jonathan like hispredecessors did, endedup complicating mattersinstead of helping. As oilprices have soar ed, themoney has become tooalluring. As volumes of oilsold through the bunkeringnetwork have risen, so toohas the number of Nigeri-ans with an interest inkeeping it going.

Bunkering became bigbusiness during an uprisingin the 2000s by militantsdemanding a greater shareof revenues from oil. They

sometimes justified thetheft and do still, evena ft er a n a mn es ty h ascurbed associated violence

as a means of taking owner-ship of a r esource fromwhich the region has bene-fited little.

As the trade has grown,so it has infected all levelsgovernment, with seniormilitary and political fig-ures staking out a leadingrole in a pattern that mir-rors the corrosive effectsthat the narcotics trade hashad on Latin Americanstates.

They have been sponsor-ing local government chair-men. The chairmen havealso been sponsoring gover-nors. These people, if notchecked, will one day pro-d uc e t he p re si de nt o f Nigeria, Austin Oniwon,the former managing direc-tor of the state oil company,NNPC said this year.

Nor is the state oil com-pany itself entirely inno-cent. Bunkering comes inseveral forms. The firstinvolves small canoes suchas those found lined up onAbonnemas shores. Thegangs that crew them navi-gate the maze of rivers andcreeks that make the deltaso hard to police, punctur-ing pipelines and siphoningcrude into small tank s.They sell this on to illegalrefineries that have mush-roomed across the delta tosupply kerosene and dieselto the domestic market athalf price. Or sell to largercoastal barges for export.

Where they can, thesebarges fill up directly fromwell heads and puncturedpipelines.

They carry the crude toocean-going tankers waitingto supply refineries at a dis-count as far afield as South

Africa, Ukraine, China,India and the Rotterdamspot market, according tomembers of a taskforce setup by the president to rec-ommend ways of curtailingf ra ud a nd t he ft i n t heenergy sector.

There is a third form ofwhite-collar bunkering.This involves tankers filleddirectly at export terminals,where metering systems aremanipulated to conceal out-flows.

All three forms of bunker-ing require collaborationbetween politicians, secu-rity forces and criminalgangs.

In the case of white- col-lar bunkering, oil companyemployees are almost cer-tainly involved as well,according to consultantsinvestigating the trade.

The presidents taskforceis headed by Nuhu Ribadu,

the no-nonsense formeranti-corruption tsar whosays he will deliver recom-mendations by next month.But as yet no effectivemeasures have been takento stem a trade eating intoNigerias main revenueearner.

Vested interests havetoo much to lose

Bunkering

William Wallislooks at theft thatcosts billionsin lost revenues

Ngozi Okonjo-Iweala: theftsled to fall in official oil sales

We haveto track

down theoil thievesGuest columnPATRICK DELE COLE

Up the creek: in a canoe ferrying containers used to transport oil siphoned from pipelines. The Niger delta is now a much sought-after posting in the military Reuters

Satellite trackingtechnology couldprovide evidence toprove complicity

As the trade hasgrown, seniormilitary andpolitical figures aretaking a big role


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Nigeria Oil & Gas

When the wave of violentunrest in the Niger deltafinally began to ebb, foreignoil companies breathed asigh of relief.

Then the pirates came.The majors offshore instal-lations largely immunefrom attack during thedelta insurgency suddenlyfound themselves targeted.T hi ev es i n s pe ed bo at sbegan attacking supply ves-sels bringing material toplatforms far off the coast.

The navy is wor kingvery hard, but the coastlineis enormous, says CiroAntonio Pagano, head ofENIs Nigerian subsidiary.Its a challenge to patrolall of it.

The attacks illustrate thebewildering difficulties for-eign oil companies still facenearly three years after thegovernment agreed with theNiger delta militants anamnesty that put an end totheir long campaign of vio-lence.

Things are a lot bettert ha n t he y w er e a t t heheight of the insurgencywhen some were forced tosuspend onshore operationsa lt og et he r. A s w el l a srestarting abandoned facili-ties, they have been able togo back into the mangroveswamps and clean up pastspills.

The amnesty has been

very helpful, allowing us toincrease production andgiving us the confidence tostart up new projects, saysMutiu Sunmonu, ShellsNigeria country chairman.Its also helped us to clearup the backlog of mainte-nance and r emediationwork in the delta.

But as well as piracy, thekidnappings and sabotagehave been replaced by anew scour ge: oil theft.According to Shell, about150,000 barrels a day of pro-duction is siphoned off bythieves. The countrysfinance minister has saidthat as much one-fifth ofgovernment revenue is lostto illegal bunkering.

Oil executives say thegover nment should bedoing more to stop the prac-tice. [They] have to takeextraordinary measures topatrol our waterways, make

maritime security effectiveand enfor ce the r ule of law, says Mr Sunmonu.You have to come downheavily on the criminals,and cut off their expor tmarkets, he says. Butthey also have to addressthe fundamental causes

poverty and the lack of jobs.

To get a sense of the scaleof the problems oil theftpr esents, consider theNembe Creek Trunkline,known as NCTL.

It was commissioned in2009 at a cost of $1.1bn,replacing an older pipelinethat had been repeatedlyd am ag ed b y s ab ot ag eattacks, and came into serv-ice a year later. But lastDecember it was shut downagain after fresh leaks werediscovered.

Thieves then took advan-t ag e o f t he p ip el in e sdepressurised state to set towork, installing dozens ofnew bunkering points onthe line.

S om e o f t he m w er eattached to lengths of pipea few miles long so that assoon as the NCTL cameback on stream, its entireflow of oil could be divertedinto barges and tankers

controlled by the criminalgangs, or into illegal refin-eries. Some connections dis-pense with the pipeline alto-g et he r a nd a re m ad edirectly on the wellhead,right where the crude oil isextracted.

That in turn caused dis-ruptions at Shells flowsta-tions, the facilities whereoil flowing from individualwells is partially treated

and pumped into lar gerpipelines.

When pressure falls, theflowstations trip and westop producing, says RikPrager, Shells oil spillresponse remediation man-ager. So the cost of this isnot just the oil thats stolen its the fact we have tostop producing to repair thepipelines.

The situation was so badthat, in May, Shell wascompelled to declare forcemajeure on its cargoes ofBonny Light, the maingrade of Niger delta crude,after NCTL was shut downfor repairs, causing thedeferment of 60,000 b/d ofproduction.

ENIs Mr Pagano saysthat, with criminals drillinginto pipelines on a routinebasis, ENI has to shut themdown for r epair s everythree days on average. He

says about a quarter of ENIs output is lost to bun-kering. Were losing a lotof oil to third parties, andwe dont even know whothey are, he says.

Mr Prager says Shell isconsidering a whole batteryof high-tech responses to

t he p ro bl em , s uc h a sunmanned drones to patrolthe delta and infrared cam-eras. It is planning to hirelocals on surveillance con-tracts to monitor pipelines,and is testing a new detec-tion system similar to aburglar alarm that is capa-ble of identifying leaks andintruders.

Its effectively a warwere fighting, so this tech-nology is from the mili-tary, says Mr Prager.

I t i s n o w on de r t ha tmajors such as Shell aretrying to divest some oftheir onshore blocks, andconcentrate instead onNigerias offshore fields,which are immune to bun-kering.

But here, too, dangersloom and not just frompirates. Foreign oil compa-nies are bracing themselvesfor the passage of the Petro-leum Industry Bill (PIB),which some fear could havea chilling effect on thecountrys investment cli-mate.

Western oil executivessay one of the biggest prob-lems is the funding short-falls by the majority part-ner in their Nigerian jointventures the government.It sets the level of spendingthat it can afford, and thepartners are not allowed togo beyond it. Yet many ofNigerias oilfields are age-ing: operators have to spendmore just to keep still.

Its a bottleneck, saysone executive. And weren ot s ur e t he P IB w il lresolve this problem.

Groups struggle with

bewildering difficultiesMultinationals

Guy Chazanreports on a rangeof problems

Refor ming Nigeriasnotoriously opaque oilindustr y was nevergoing to be easy. Few

expected it to be quite so diffi-cult. Nearly four years after itwas first presented to parlia-ment, the Petroleum IndustryBill (PIB), a wide-ranging pieceof legislation intended to trans-for m the sector r adically,remains a work in progress. Ithas been rewritten so manytimes, and by so many people,that there are countless draft

versions in circulation. Prom-ises of its imminent passagecome every few months, buthave never been kept.

All the while, uncertaintyover the proposed laws has puttens of billions of dollars ofpotential investment by oil com-panies on hold and preventedthe government from being ableto selling off new oil blocks orrenew contracts.

But is there now a genuinepush to get the PIB through? InJanuary, President GoodluckJonathan established a commit-tee to fast-track the bill. Amonth later, Ngozi Okonjo-

Iweala, the respected financeminister, told the FT that thelaw would pass by the end of2012 and that progress would bev is ib le i n tw o t o t hr eemonths. Five months on and afresh draft of the bill has indeedbeen presented to Mr Jonathanand approved by his cabinet.Last week it was presented tolawmakers for assent.

Some experts believe thiscould finally be the year whenthe law is passed. I do thinkthat this time the bill will gothrough, even if only because offatigue over this issue, saysRonke Onadeko, an oil and gasconsultant, in Lagos. But the

real question is, are we going toget a good bill?

It is a concern widely echoedin the industry. The originalidea behind the PIB was that itwould bring the sector into linewith global standards. The fiscalterms of oil and gas production,which are more generous topetroleum companies than inmany other countries, were tobe amended to net the govern-

ment more revenue. The state-owned Nigerian National Petro-leum Corporation, whose dys-function and lack of accounta-bility is a serious drag on thesector, was to be overhauled,stripped of regulatory powersand turned into a commercialentity such as Brazils Petro-bras. The involvement of localcompanies in oil production andservices would be promoted andenvironmental standards andenforcement tightened. Perhapsthe most important reform wastransparency ensuring an endto the murky deals that allowedpoliticians to use oil wealth as asource of patronage for decades.

This was all extremely ambi-tious, especially considering thepowerful vested interests bothin the government and the pri-vate sector that profit hugely

from the status quo. In addition,the multinationals, which havealso reaped excellent returnsd es pi te t he r ot , h av e t heresources to lobby hard againstany changes that might affecttheir bottom line.

Analysts who have seen thelatest version of the bill leakedin May say it appears as thoughthe vested interests have signifi-cantly diluted the bills originalgoals.

Rather than clipping the far-reaching powers of the petro-leum minister, it gives her orhim additional authority overall the oil and gas institutions.

Some new reporting require-ments will improve transpar-ency. But provisions that wouldhave forced the government topublish details of all its receiptsfrom oil companies, includingsignature bonuses, as well asthe volume of oil pumped, havebeen stripped away. Such lackof openness is one of the mainr ea so ns t he re i s s o m uc hunchecked corruption in thesector, transparency campaign-ers say.

Changes to the NNPC, whoseinability to fund its share of

joint ventures with oil majors is

a big source of frustration, alsofall short of industry expecta-tions. The PIB calls for a newnational oil company to be setu p a nd l is te d o n t he s to ckexchange. Yet the existingNNPC will continue to operateand there is little detail of howits assets will be divided up.

The proposed tax and royaltyregime for onshore productionis more favourable to the oilcompanies than in previousdrafts, and compared with cur-rent legislation, experts say.That is not to say that the mul-tinationals are content with the

bill as it stands. There arestrong grumblings about thedeepwater provisions.

The fiscals are a concern, butnot the only one, says oneexecutive at a western oil com-pany. As it stands, the bill isbad for businesses, and bad forNigeria.

Even if Mr Jonathan doessend the PIB to the upper andlower houses soon, the slowapproval process for legislationin Nigeria means it will be sev-eral months at the least beforei t c an b e s ig ne d i nt o l aw ,according to Antony Goldman,

chief executive of PM Consult-ing in London. That means thebreakthrough may come only in2013. And that is assuming thatlawmakers give their assent tothe PIB, which is no guaranteegiven their tensions with thepresidency, as well as the con-tents of the bill.

But whatever its flaws, MrGoldman believes the benefits ofhaving the legislation passedstrongly outweigh the nega-tives. What the industry needsnow is a bill, and clarity notnecessarily the best bill in theworld.

Flawed bill willbring clarity to

frustrated industryLegislationXan Rice considersprospects for bettertransparency

NNPC headquarters: the dysfunction and lack of accountability at the state-owned company is a serious drag on the sector Bloomberg

Analysts say itappears as though the

vested interests havesignificantly dilutedthe bills original goals

ContributorsXan RiceWest Africa Correspondent

Guy ChazanEnergy Correspondent

William WallisAfrica Editor

Stephanie GrayCommissioning Editor

Steven BirdDesigner

John WellingsPicture Editor

For advertising details,contact:Mark Carwardine on:+44 (0) 207 8734880;email:[email protected] your usualrepresentative

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Oil industryinsiders havecalled formore patrolson the

waterways


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FINANCIALTIMES TUESDAY JULY 24 2012 5


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Nigeria Oil & Gas

Fy ne fa ce F ar ah w asattending secondaryschool in Ogoniland, inNigerias delta region,

when he heard the explosion. Anearby oil well owned by Shellhad suffered a massive blowout.Fire engulfed the surroundingfarmland, and oil coated thetrees and rooftops in the nearbyvillage of Boobanabe. The entirecommunity fled the area for sev-eral weeks until Shell was ableto bring the situation under con-trol, Mr Farah recalls.

But while the flames wereextinguished, the environmentaldamage remained. Shells prom-ise to rehabilitate 13.2 hectaresof land was not honoured, thelocal community says. Mr Farahand several other families thatowned the land sued for com-pensation. In 1994 24 yearsafter the blowout occurred, and

five years after the start of legalproceedings they won thecase, and were awarded N4.6m(about $210,000 at the officialexchange rate).

Still, locals, including MrFarah, now 65, maintain thatthe area was never properlycleaned up. This was confirmedlast year in a landmark reportthat found both the soil andgroundwater in Boobanabe werecontaminated, and that adetailed plan should be preparedfor clean-up.

The report, commissioned bythe government and authoredby the UN Environment Pro-gramme (Unep), involved sur-veys at more than 200 locations.

Unep said pollution fromover 50 years of oil operationshas penetrated further anddeeper than many may havesupposed. Public health wasseriously threatened in at least10 communities because of thehigh levels of hydrocarbons in

the drinking water. Air pollu-tion was all pervasive, whilethe impact on mangrove vegeta-tion was disastrous.

The author s of the r eport

acknowledged that artisanalrefining taking stolen oil andrefining it with primitive meth-ods had been a contributingfactor , especially in r ecentyears. But the source of the pol-lution stretches back decades.Shells Nigerian operation,which produces nearly 40 percent of the countrys oil, camein for particular criticism. The

Shell Petroleum DevelopmentCompany (SPDC) a joint ven-ture that includes the state-owned Nigerian National Petro-leum Corporation, ENI and

Total, and of which Shell is theoperating partner produced oilin Ogoniland until 1993 when itwithdrew because of violentopposition from local communi-ties. Though production neverrestarted, the SPDCs Trans-Ni-ger pipeline that crosses Ogoni-land continued to operate.

Unep said the control andmaintenance of oilfield infra-

structure in Ogoniland has beenand remains inadequate, add-ing that the SPDCs own proce-dures had not been applied andthat its remediation techniques

have not proven to be effec-tive in numerous cases. Clean-ing up Ogoniland, which repre-sents less than 10 per cent of thecountrys oil producing area,could require the worlds mostwide-ranging and long-term oilclean-up exercise ever under-taken.

Unep recommended that thegovernment establish a restora-

tion authority to oversee theclean-up. A $1bn fund set up bythe government and oil compa-nies would cover the first fiveyears of the programme. Among

other suggestions wer e theestablishment of specialist cen-tres devoted to soil managementand environmental restoration,and improved regulation andmonitoring.

If this happened, it could gosome way to repairing relationswith communities in Ogoniland,and set an example for rehabili-tation of other parts of the delta.

This is crucial, since a failure toaddress environmental issueswill only fuel further resent-ment and could lead to newinsecurity. But nearly a year

after the report was published,local communities and activistscomplain that little has beendone.

The government set up a task-force to chart the way forward.

Its report was apparently pre-sented to President GoodluckJonathan in May, but has notbeen made public. A senior offi-cial at the petroleum ministrys ay s t he g ov er nm en t w il lannounce an action plan soon.

One impediment to full reme-diation is the problem of con-tamination both from pipelineleaks and artisanal refining w hi ch U ne p s ai d m us t b ebrought to an end before aclean-up can commence. Evenso, Legborsi Saro Payagbara,advocacy officer for the Move-ment for the Survival of theOgoni People, a campaigninggroup, says the governmentshould have done a lot more bynow.

Last year, Shell said it wel-comed the Unep report. Whiledisputing some of the findings,the company said that its effortsat some sites had not been fullyeffective, and that it wouldcheck a sample of other loca-

tions. Since then it has beenworking with the state govern-ment to provide potable waterto the affected communities andcontinued routine remediationefforts that predated the report.Jon Barnden, Shells communi-cation manager for west Africa,says six or seven sites in Ogoni-land are being cleaned up atpresent.

In places such as Boobanadethere is still a lot of mistrust,however. Earlier this year, Shellemployed a local contractor toclean up the site of the 1970 wellblowout. It says the work wasinspected by the environmentalregulator and signed off as satis-factory. But on a visit to the sitein June, patches of oil residuecould be seen in the soil. In onespot, fresh crude was bubblingup. Mr Farah says the remedia-tion work was not satisfactoryand that independent expertsshould be called to verify whatwas done. We still cannot plant

anything there and the watertable is contaminated, MrFarah says. There is still notenough action that is thetruth.

Pollution a threat to health in OgonilandEnvironment

Xan Rice on thedevastating findings of

a UN report

Unhealthy mix: a man in the Ogoniland region tries to separate oil from water in a boat on the Bodo waterways. Pollution there has been attributed to Shell equipment failure AFP

Restoring the landcould require theworlds most wide-

ranging and long-termoil clean-up exerciseever undertaken


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Nigeria Oil & Gas

the gas sector and trans-form the NNPC from a dis-credited organisation opento abuse by politicians intoa commercial entity withsubstantial independencefrom the government inpower.

Mr Jonathan and his cabi-net approved the PIB thismonth and sent it to law-makers for assent, which isby no means guaranteed asprevious versions have beenrejected.

Diezani Alison-Madueke,the petroleum minister,says the legislation wouldmake the industry morecompetitive and accounta-ble. It proposed revolution-ary changes.

That remains to be seen.

Experts who have seen themost recent version of thebill say it falls well short ofits original aims, beingweaker on transparencythan campaigner s hadhoped, and low on detaila bo ut h ow e xa ct ly t heNNPC will be unbundled

a big concern for the multi-nationals that are its jointventure partners.

Even so, the law is beingeagerly awaited. From abusiness perspective, thenew bill cannot come fastenough, says Mr Odubeko.

Whether its good or bad,at least people will knowwhat they are dealing withand can do the financialmodelling. I believe that itwill be a game changer forNigeria and that invest-ment will flow because ofthe [attractive] nature ofcountrys hydrocarbons.

The government needssuch an outcome, since itrelies on oil for 80 per centof its revenues and financesare stretched.

Passage of the bill willclear the way for a new

licensing r ound, whichshould attract strong inter-est from both the multina-tionals and the emergingNigerian oil companies, net-ting the treasury billions ofdollars.

There are other positivesigns too.

The militancy in the deltathat cut oil production inhalf in early 2009 has dieddown after more than 26,000former rebels were grantedamnesty and generousstipends.

The programme, in whichMr Jonathan has a signifi-cant stake given his rootsin the region and his role insetting it up, has made a

significant difference tooperating conditions forb ot h c om pa ni es i n t hedelta.

Kidnapping still occurs,but it is less frequent andless violent than before.

Meanwhile, the instancesof oil installations and pipe-lines being blown up hasfallen dramatically.

The payments to ex-mili-tants are not a long-term

solution. Training courses,which are being under-t ak en b y t ho us an ds o f former rebels, must trans-late into genuine employ-ment opportunities, or someof them will surely returnto the creeks and take uparms.

Job growth in the deltahas been weak of late, butn ew i nv es tm en t a ndincreased production couldchange that.

However , at the sametime as the amnesty hasr educed oil companiesheadaches over the securityof their personnel, theyhave suffered from a dra-matic increase in oil theft.

Industrial-scale bunker-ing involving cr iminalgangs, some former mili-tants and the security

forces, costs the industry upto 400,000 b/d, close to afifth of the countrys pro-duction, according to thefinance ministry.

There has been little signto date that the governmentis serious about tacklingthe problem.

Legislation set to be a game-changer

PresidentGoodluckJonathan:scheme toreformmilitants

The Niger delta was on firefour years ago. Militants,driven by a sense of injusticeand criminal tendencies, had

succeeded in drastically cutting crudeproduction by blowing up pipelinesand kidnapping oil workers. From2.5m barrels a day in 2005, outputdropped as low as 800,000b/d on somedays.

Nigeria had lost to Angola its crownas the continents top producer.

Miabiye Kuromiema, president ofthe Ijaw Youth Council, a civil societymovement representing the deltaslargest ethnic group, wanted the trendto continue. I hoped that productionwould go to zero, so the governmentcould not pay its bills, he says. Weneeded a wake-up call to the socialand governance crisis.

That is why he rejected the idea of ablanket amnesty for the militants, asthe government was proposing at thetime. Many other activists agreedwith him, though less for ideologicalreasons than the conclusion that itsimply would not work. Foreign diplo-mats, whose offers of advice in settingup demobilisation programmes werepolitely ignored by the government,felt the same.

So when the late president UmaruYarAdua officially launched theamnesty programme in June 2009,expectations were low. But by thatOctober more than 20,000 militantshad handed in weapons and signedup. A year later a further 6,000 peoplewere added to the list, taking the totalto 26,358 mor e than wer e everactively involved in the militancy.

Though the scheme has been closedto new entrants for nearly two years,many thousands of people, includingrebels who were afraid of being stig-matised at the time the offer was firstmade, are still clamouring to be partof it. The reason was the amnesty

offer was genuine nobody was perse-cuted after handing in a gun andalso financially attractive. In returnfor signing a pledge of non-violenceand attending a demobilisation camp,each would receive a monthly stipendof 65,000 naira ($400). They were also

promised education or training.The programme quickly produced

the desired result of ending hostilities.Attacks slowed and then stopped. Oilproduction has soared to about 2.5mb/d. More than 11,500 of the formermilitants have received education orcourses in Nigeria or one of morethan a dozen foreign countries. Law-rence Pepple, the head of reintegra-tion at the Niger Delta Amnesty Pro-gramme, says the swift end to insecu-rity made it one of the most success-ful DDR [disarmament, demobilisationand reintegration] efforts in Africa.

But it is still early days. Is the peace

sustainable? Mr Kuromiema is notconvinced. He acknowledges theamnesty has stabilised the regionand created value, and that the train-ing given to the former militants hadopened their eyes to a new world.

But he worries too few jobs arebeing created in the delta to ensurethat the former rebels can be gain-fully employed. He is also concernedthe generous payments to ex-mili-tants, which may continue to 2015,have created a dangerous precedent.

The monthly stipends are four timesthe minimum salary for local govern-ment workers. Some of the militantleaders who accepted the amnesty andhave been awarded lucrative con-tracts around the oil sector have beeneager to flaunt their new wealth, driv-ing about in expensive cars. Allthose people who never carried gunsduring the militancy: how do they feelnow? That its good to carry gunsbecause then the government will

negotiate with you? The potentialexists that those who are disen-chanted will restart the violence,says Mr Kuromiema.

Many people in the delta still feeldisgruntled. The underlying problemsthat provoked the rebellion have not

been addressed: poverty, underdevel-opment, corruption by the ruling elite,as well as decades of environmentaldamage caused by oil companies and,more recently and on a smaller scale,illegal oil refiners in the creeks of thedelta.

What is more, activists say thatsome of the militant leaders did notgive up all of their weapons. Oldhabits also die hard. The surge inlarge-scale oil theft, known as bun-kering, in recent years would nothave been possible without theinvolvement of some of the formerrebels who have swapped what theyclaimed was a political militancy forcommercial militancy.

Yet it also true that many of themilitants are genuinely trying to turntheir lives around, with the help ofpeople in government and in the pri-vate sector.

Ikioye Dogianga runs an engineer-ing business in Port Harcourt and pro-vides services to the likes of Shell andEni. For the past eight months he hasbeen teaching 40 former militants thetheory and practice of welding, in thehope that they will be able to find jobsor set up their own workshops. Theirattitude has impressed him.

These guys are hard-working andare determined to get experience, hesays. In the past they may have beentroublemakers, but they are ourbrothers and its our duty to helpthem get back into normal society.

Okoma Akara, who has a wife andthree children, is one of his best stu-dents. As a militant in Delta state, MrAkara, 28, made money by kidnappingpeople and stealing oil, but also sawmany of his friends die in clasheswith the security forces.

If it wasnt for the amnesty I dontknow if Id be alive today, Mr Akarasays. I am grateful, but I want moretraining so I can get a job with an oilcompany.

Questions raised overthe price of delta peace

Amnesty

Xan Rice finds problemsthat provoke d militancyhave not been addressed

A farewell to arms: weapons surrendered by former militants on display at a collection centre in Port Harcourt in 2009 Reuters

In the past they may havebeen troublemakers, butthey are our brothers andits our duty to help them

Continued from Page 1


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