July 19, 2017

Nigeria and the hunt for oil in Boko Haram’s heartland

Nigeria and the hunt for oil in Boko Haram’s heartland

Oil rig worker

Nigeria is reviving its search for oil in the country’s conflict-riven northeast, aided by China and emboldened by gains made against Boko Haram.

President Muhammadu Buhari’s government is exploring inland basins ranging from central Benue state to Boko Haram’s heartland in northeast Borno.

Oil rig worker

Renewed attacks on oil and gas infrastructure in the southern Niger delta last year crippled production and exposed Nigeria’s economic vulnerability.

But a new discovery elsewhere would diversify the country’s supply, with the potential to transform the impoverished northeast and wider north.

“The president would be very happy if we made a significant find in commercial quantities there,” Nigerian National Petroleum Corporation (NNPC) spokesman Ndu Ughamadu told AFP.

“It’s a priority to the NNPC and it’s a priority to the country.”

Yet industry insiders warn pumping oil in the northeast, where the jihadists are still fighting a guerilla war, could recreate turbulence seen in the south.

“It’s not such a win-win situation for us. If we do find oil there, then it gives Boko Haram more motivation to attack,” said Ecobank energy analyst Dolapo Oni.

“We’ll start to see communities in the region looking to exercise more land control. That’s what we’re seeing in the Niger delta.”

– Rosy outlook –
There are already disputes. In March, landowners in Alkaleri, Bauchi state, demanded government compensation over claims that exploration work was damaging farmland.

Abuja, however, remains optimistic and maintains northeastern oil could provide a buffer against unrest in the southern swamplands.

Nigeria, Africa’s largest oil producer, has been one of the countries worst affected by the plunge in global crude prices since mid-2014.

Last year, its economy shrunk 1.5 percent — its first full-year contraction in 25 years — while inflation soared and the naira currency weakened.

The squeeze in revenue was compounded by the attacks from militants demanding a greater share of crude revenues for local people.

Exploration work in Borno state had started before Nigeria fell into recession.

Work is centred on a triangle of hotly contested land stretching from Gubio in the west to Marte in the east and Kukawa, in the far northeast corner near Lake Chad.

“We had to suspend operations on November 24, 2014,” said Mazadu Bako, general manager of NNPC’s Frontier Exploration Services.

But he said the NNPC has received security clearance to move back in and a team had recently visited army commanders in Monguno — between Kukawa and Marte — “to discuss our strategy for the re-entry to the Chad basin”.

– Chinese expertise –
To help spearhead the search, the NNPC is working with the Bureau for Geophysical Corporation, a subsidiary of the China National Petroleum Corporation (CNPC), that specialises in seismic data exploration.

Nigeria is banking on CNPC’s years of experience in neighbouring Chad and Niger to discover commercial quantities of crude.

In Chad’s Doba basin near the Cameroon border, CNPC, Exxon and Glencore are producing around 110,000 barrels per day, according to energy consultants, Wood Mackenzie.

In Niger, CNPC has discovered around one billion barrels on the Agadem block and is currently producing around 17,000 barrels per day.

That pales in comparison to the delta’s output capacity of 2.2 million barrels per day, but is still a significant source of income for the underdeveloped region.

Investors are getting curious and in November last year, the NNPC signed a memorandum of understanding with British firm Savannah Petroleum, a major player in Niger, to evaluate the commercial potential of the region.

In January, the NNPC said it had “stepped up its collaboration” with US oilfield services company, Schlumberger, to search for oil in the Lake Chad basin.

– Far from reality –
“There’s a heap of basins in that northern area, which, to be fair, are clearly under-explored,” said Gail Anderson, lead Nigeria analyst at Wood Mackenzie.

“There’s definite potential and with insecurity in the Niger delta, there’s a lot of sense in that.

“But then again, if Boko Haram is active, maybe you wouldn’t want to go drilling in the northeast.”

Today, Nigeria’s government is focusing its exploration work in Bauchi and Gombe, states a safer distance from Boko Haram hotspots in and around Lake Chad.

That means for now, oil production in the far northeast is a distant prospect.

Similar campaigns in the past have failed to result in commercial finds, explained Aaron Sayne, a researcher at the New York-based Natural Resource Governance Institute.

Northern politicians, like Buhari, have summoned the chimera of oil before to use as a promise of hope and as a show of strength against the more prosperous south.

“I’m sure it could be real, but it sounds like it’s a long way away,” said Sayne.