US embassy cable - 04ABUJA1486

S E C R E T SECTION 01 OF 03 ABUJA 001486 
 
SIPDIS 
 
NOFORN 
 
E.O. 12958: DECL: 08/27/2014 
TAGS: PREL, PGOV, NI, DELTAVIOLENCE 
SUBJECT: NIGERIA'S DELTA SNAKEPIT: WILL WE AND NIGERIA BE 
SNAKEBIT? 
 
Classified By: Ambassador John Campbell for Reasons 1.5 (B & D). 
 
1. (S/NF) SUMMARY:  Nigeria's Delta is the fifth largest 
supplier of oil to the U.S. and also supplies some 80 percent 
of the Nigerian Government's revenues.  It is not under GON 
control, however, and is awash with well-armed and 
well-funded private militias, environmental catastrophes, oil 
theft (an average of 120,000 bbl/day), corruption, poverty 
and death.  This has been true for some years now, but the 
growing capabilities of the militias, their abundance of 
funding to buy more and better weapons, communications gear 
and politicians, and no proportional effort by the GON to 
regain control, has the oil majors there very worried about 
the future.  The issue is not keeping oil flowing today, but 
rather whether, and under what terms, oil and gas will flow 
in the all-too-foreseeable future if current trends are 
permitted to continue -- issues that could affect the 
viability of the Nigerian state as well as our energy 
supplies.  END SUMMARY. 
 
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A CATALOG OF PROBLEMS 
--------------------- 
 
2. (C) The list of benefits from Nigeria's Delta is short and 
powerful: 
 
-- Nigeria is the fifth largest supplier of oil to the U.S., 
out of an output of some 2.3 million barrels per day 
(bbl/day).  That output will almost certainly expand, and be 
augmented by significant exports of gas. 
 
-- The Nigerian Government (GON) depends on oil and gas for 
around 80 percent of its budget.  GON revenues may grow as 
the price of oil continues to be well higher than the 25 
usdols/bbl figure for revenue in the budget, but the 
percentage of the GON budget is expected to be stable despite 
changing oil prices because excess revenues are being kept 
separate in an escrow account. 
 
-- Oil, gas and service companies from the U.S. and other 
countries make major profits from their Nigerian operations, 
despite the Delta's growing list of costs and dangers. 
 
3. (C) The list of ills is long and longstanding: 
 
-- The GON exercises little control in many areas, and there 
has been no meaningful economic or social development outside 
of the oil companies' operations.  Despite many police 
checkpoints, people live in fear and armed robberies take 
place in broad daylight. 
 
-- Violence in the Delta has become a way of life, and deaths 
are underreported by the media (although there are also 
instances where the media exaggerates).  Shell reports that 
more than 1000 people died in clashes the past year. 
 
-- Infrastructure is decaying, and environmental damage from 
oil operations has made the traditional economy of 
subsistence farming or fishing difficult or impossible in 
most areas. 
 
-- Some ethnic groups have well-funded, well-armed militias, 
especially the Ijaw.  Many of these militias join well-armed 
gangs in oil theft rings, political hits, and "security 
contracts" from oil companies, as well as carry on 
longstanding tribal competition for economic and political 
resources. 
 
-- Large numbers of the Delta's high density population are 
internally displaced.  These pockets, and Delta society in 
general, have spawned an anti-establishment culture among 
Delta youth.  Chieftancy feuds, economic stagnation and the 
multiplicity of conflicts have made traditional society and 
elders progressively more irrelevant over the years. 
 
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AND THINGS MAY GET MUCH WORSE 
----------------------------- 
 
4. (C) Over the many years of having to essentially provide 
their own security and do their own community development, 
the oil companies have poured money into select 
villages/clans to buy protection or placate local 
populations.  Over three decades that money has piled up guns 
in the hands of Delta villagers.  That growing stockpile of 
arms has made the militias a tough opponent for GON security 
services since the 1990s, and new funds from systemic oil 
theft is growing militia arms further in both quantity and 
quality. 
 
5. (C) "Bunkering," the theft and sale of crude oil, now an 
average of some 120,000 bbl/day, has become a massive source 
of illicit funds.  Even a conservative price of 23 usdols/bbl 
would make that a one billion dollar per year illicit 
industry, and we suspect the oil is sold at somewhat higher 
than 23 usdols/bbl at least to North Korea and other 
customers in this time of 47 usdols/bbl international prices. 
 The oil is loaded on barges similar to those used in the oil 
companies' legal operations, and transferred to tankers at 
sea for shipment anywhere in the world.  The large 
deposits/closer to markets advantages that the oil majors 
enjoy in Nigeria are now also enjoyed by oil theft cartels. 
 
6. (S/NF) While the oil majors do not like losing those 
120,000 bbl/day, that is not the main reason behind press 
stories that some are considering leaving Nigeria.  Their 
revenues from the 2.3 million bbl/day that is shipped by them 
legally is more than enough even given their present costs. 
What the oil majors fear is that illicit bunkering industry 
funding a continuing and escalating security threat from 
militias and gangs, which the oil majors' traditional 
approaches cannot contain, and which the GON so far has not 
decisively tried to end. 
 
7. (S/NF) Already the risk premium insurance companies charge 
for the Delta has doubled contract costs there for the energy 
sector companies that do not self-insure.  Shifting to 
offshore fields was an attractive option, but now well armed 
and coordinated gangs have hit oil platforms in the Gulf of 
Guinea.  ChevronTexaco's security officials contact the 
Ambassador frequently, and its managers claim it will cost 
650 million dollars to restore on-shore facilities damaged by 
militias/bunkerers 
 
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WHY DOESN'T THE GON DO SOMETHING ABOUT THIS? 
-------------------------------------------- 
 
8. (S/NF) Actually the oil is being stolen from Nigeria, not 
from the oil companies, but one problem is that many in the 
GON are being paid by the thieves, or otherwise profit from 
the thefts and other lawlessness in the Delta.  Corruption is 
a major problem at all levels of the Nigerian Government, but 
many important officials are rumored to be deeply involved in 
the business of bunkering too. 
 
9. (S) In addition to the personal-gain reasons among GON 
officials to let things continue, there are serious obstacles 
to the GON taking decisive action.  In the absence of 
security, providing meaningful economic and social 
development for the region as a whole would be impossible. 
The GON has done little, and donors' assistance programs are 
a drop in a bucket compared with a billion-dollar illicit 
industry. 
 
10. (S/NF) The GON sending in the army to restore order would 
present difficulties even if President Obsasanjo had the will 
to make it happen.  Despite some progress in 
professionalization, major human rights violations would be a 
major possibility.  Moreover, the militias are well armed for 
their swamp environment, have good communications/control, 
and have the potential funds to be far better paid than 
Nigeria's soldiers.  They could, and do sometimes, put up a 
hard fight.  Over the past year the Nigerian military's Joint 
Task Force in the Delta has not even tried to establish full 
GON control during its "Operation Restore Hope."  It has 
reduced some of the sabotage of oil company facilities but, 
as one captain of a Nigerian navy vessel noted about 
anti-bunkering operations, "We have gotten the little guys, 
but we aren't going after the big guys." 
 
11. (S) And a decisive military effort, even backed by a 
development effort with enough funding to compete with the 
bunkerers for people's allegiance, would not be enough. 
There must be a political component.  The elections in the 
Delta in 1999 and 2003 were widely regarded as a sham. 
Nevertheless, most of the age-old ethnic feuds have become 
political in Nigeria's "democracy."  Mainstream politicians 
now use militias or gangs as politics by other means (a 
growing problem for Nigeria outside the Delta too).  This 
plus all the illicit "new money" has led to the Ijaw and 
other feuding tribes being divided amongst themselves, as 
well as a breakdown in the influence of "traditional leaders." 
 
12. (S) A possible worst-case scenario is that these 
politicians, massively funded by oil theft corruption and 
using those funds to field private militias, might decide 
there is more money to be made by using these assets to form 
cartels to organize and reduce violence in the theft of oil. 
It is not impossible that cartels based on such massive 
illicit industry could someday threaten Nigeria's polity. 
More probable is that the bunkering will continue, with 
alternating cooperation and fighting among the bunkerers, and 
half-hearted efforts by the GON and major bunkerers to stop 
the minor league thieves. 
 
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WHAT CAN THIS PROBLEM DO TO US? 
------------------------------- 
 
13. (S/NF) ChevronTexaco's and Shell's hints in public that 
the present situation might cause them to withdraw from 
Nigeria are, for now, not realistic.  Both make too much 
money here.  But as the militias obtain more arms, and notice 
that there is more money to be made threatening oil companies 
than threatening each other, a few violent attacks on company 
facilities or employees could alter that equation. 
International terrorist attacks would have the same effect. 
But the oil would continue to flow, with interruptions 
perhaps in some operations, even if U.S. oil majors were 
replaced at the pumps. 
 
14. (S/NF) The threat is more long term.  Nigeria's proven 
oil reserves are growing and gas (LNG) is beginning to come 
on line in significant amounts, but it requires continued and 
expanding capital investment.  Non-U.S. operators, even the 
Nigerian Government, could possibly keep a considerable 
proportion of present production going but not invest the 
massive amounts needed for growth.  And such a massive 
illicit industry pushing the GON even farther from control of 
the Delta raises the possibility of civil war if Nigeria's 
other teeming millions lose access through the government to 
the Delta's revenues. 
 
15. (S/NF) Nigeria's leaders, as well as the oil majors, know 
these potential dangers.  The oil majors appear to have come 
to the conclusion that drastic changes must be made to the 
current paradigm in the Delta.  Getting the Nigerian 
Government to pay the drastic costs, and take decisive action 
for the future despite many of its leaders' present gains 
from the status quo, may well be a different story.  The 
forces against altering the status quo grow stronger with 
every illicit barrel sold, even if they do not use a 
McDonalds sign to advertise how many. 
CAMPBELL