The News
A ruptured pipeline in Nigeria has sparked a political crisis that highlights the challenge of increasing output and revenues in Africa’s biggest crude oil exporter, amid broader efforts to revamp the economy.
Nigeria’s economy is reliant on oil exports, with the commodity providing more than 90% of the country’s foreign exchange earnings. Oil companies have often blamed vandalism and theft along pipelines for frustrating the country’s ability to reap the rewards of global oil price highs in recent years.
The Trans-Niger Pipeline runs through Nigeria’s southern Niger Delta region with a capacity to carry 450,000 barrels of oil per day — about a third of the country’s daily output — from production fields to an export terminal. Renaissance Africa Energy, a consortium of four local companies and a foreign partner, owns the pipeline network as part of onshore assets it acquired this year from the Nigeria subsidiary of the British oil giant Shell.
On Monday, the company and police authorities confirmed an explosion at a section of the line in Rivers, Nigeria’s third-largest state by internally-generated revenues after Lagos and the federal capital Abuja.
A two-year power struggle between the state’s governor and a legislature backed by a former governor, who is currently a federal minister, has erupted into a political crisis with potential repercussions for the national purse.
Nigeria’s President Bola Tinubu declared a state of emergency in Rivers within a day of the incident, suspending the state’s governor and legislature for six months in an unusual step, and placing a temporary sole administrator in charge. Both houses of Nigeria’s parliament ratified the move on Thursday.
A spokesperson for Renaissance Africa said oil flows were “successfully diverted” into unimpacted parts of the pipeline network on Wednesday after the damage to one section. Federal regulators began a joint investigation at the site on Thursday to determine the cause of the break, but “production from the field has resumed into the facility,” the spokesman told Semafor. A timeline for repairing the damage is unclear at the moment, he said.
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The break in Rivers, also home to one of Nigeria’s four state-owned refineries, is the latest high profile instance of a major breach to energy infrastructure. Eyewitnesses in the Mogho-Gokana community, where a section of the pipeline broke, told Nigerian broadcaster Arise TV that the likely cause was sabotage. Renaissance’s initial assessment blamed arson for the break.
Tinubu justified his emergency intervention in the state as necessary to restore order. But the emergency proclamation was denounced as either unwarranted or unconstitutional by the Nigerian Bar Association umbrella body for lawyers, Tinubu’s two main rivals in the 2023 presidential election, and democracy advocacy groups.
The View From analysts
Kelvin Emmanuel, an energy economist in Abuja, said the president’s action will “most likely disrupt output for oil and aggregation for gas” in Nigeria’s oil-producing states. The timing of the crisis is particularly unwelcome for Renaissance, he said, as the company navigates “legacy liabilities” inherited from Shell, especially with respect to figuring out which assets require remediation, decommissioning and abandonment.
Mucahid Durmaz, a London-based risk analyst covering West Africa for Verisk Maplecroft, expects some operational delays for Renaissance’s operations in Nigeria but with limited impact in the long-term. The company has an interest in showing “that local operators can address complex security challenges in Nigeria’s oil and gas sector.”
However, the attack could heighten investor apprehension and undermine Nigeria’s recent success in increasing oil output, Durmaz said.
Notable
- Nigeria has improved security measures in the Niger Delta in a bid to combat oil theft which costs the country millions of dollars each month, reports Fidelis Mbah for Al Jazeera.