US embassy cable - 03LAGOS85

UNCLAS SECTION 01 OF 03 LAGOS 000085 
 
SIPDIS 
 
 
SENSITIVE 
 
 
E.O. 12958: N/A 
TAGS: ECON, PBTS, ENRG, EFIS, PGOV, NI, CM 
SUBJECT: NIGERIA: BARKING DOWN A DRY WELL - FEW 
ECONOMIC CONSEQUENCES FROM BAKASSI RULING 
 
REFS:  (A) Abuja 2934 
-      (B) Abuja 2833 
-      (C) Abuja 2721 
-      (D) Abuja 2337 
-      (E) Abuja 2268 
 
 
SENSITIVE BUT UNCLASSIFIED, PLEASE TREAT ACCORDINGLY 
 
 
1. (SBU) SUMMARY.  Nigeria should endure no economic 
losses due to the decision of the ICJ awarding the 
Bakassi Peninsula to Cameroon.  Despite speculation of 
vast crude reserves offshore, several existing oil 
wells in the waters impacted by the decision appear to 
be non-producing and there is little expectation of 
significant production from the disputed region in the 
near future.  Further, there is virtually no other 
economic activity associated with the peninsula beyond 
fishing and farming. Meanwhile, there are social and 
political reasons for the ongoing attention paid to the 
ruling in the Nigerian press.  A recently formed joint 
commission may resolve Nigeria's post-judgment 
reservations by establishing a timetable for the phased 
withdrawal of Nigerian troops from the peninsula.  END 
SUMMARY. 
 
 
2. (SBU) In mid-November, Econoffs met with 
representatives of ExxonMobil to discuss the economic 
impact of the International Court of Justice (ICJ) 
ruling which essentially granted Cameroon possession of 
the Bakassi Peninsula. The company's representatives 
referred to maps drawn for ExxonMobil after the ICJ 
decision indicating new lines of demarcation associated 
with the ruling.  The ruling delineates territorial 
waters offshore for each country.  From the maps Exxon- 
Mobil showed us, it appears that Nigeria retains most 
of the offshore territory that it originally claimed, 
as only a relatively small, well-defined area of water 
near Bakassi was claimed by both parties.  Because the 
islands of Equatorial Guinea rest in the Gulf near both 
Nigeria and Cameroon, there is not enough distance 
between these countries' shorelines to create 
international waters.  Because of the remoteness of the 
region and the direction of the offshore boundary drawn 
by the ICJ, the ruling should have no effect on 
shipping lanes or any port access for either country. 
Likewise, existing agreements between Nigeria and 
Equatorial Guinea, and between Nigeria and Sao Tome and 
Principe should not be affected by the ruling, although 
recently renewed attention is being paid to each for 
strategic and development reasons. 
 
 
3. (SBU) Cameroon began exploring and developing oil 
fields in the Bight of Bonny in the 1980s.  It was 
thought the waters held the promise of fantastic 
returns on investment, but this has not been borne out. 
The court claims over Bakassi began in 1994, with 
Nigeria and Cameroon each claiming an arc of water 
extending out from the peninsula in its respective 
favor.  According to the maps published by the court 
and others produced for ExxonMobil, the ICJ ruling 
chose neither's claimed offshore boundary, but rather 
drew a new boundary line.  Ten oil wells exist in the 
main zone that fell between the Nigerian and 
Cameroonian claimed lines, all developed by Cameroon 
and, as a result of the ICJ ruling, now resting within 
Cameroonian territory.  It appears that none are 
producing, and four or five may be dry.  An additional 
ten wells exist in other waters claimed by Cameroon and 
one Cameroonian well now falls within Nigerian 
territory, but it too appears to be non-producing.  The 
company representatives do not believe there are 
significant onshore oil deposits at Bakassi. This 
belief was also expressed by ExxonMobil's VP for Africa 
in a separate conversation with the Ambassador. 
 
 
4. (SBU) One field that now straddles both countries' 
boundaries is producing oil at a varying rate up to 
40,000 barrels per day (bpd) from a well on the 
Nigerian side of the new boundary. The ExxonMobil 
representatives speculate that development rights to 
this field will be negotiated between the countries, 
akin to the Nigeria - Sao Tome and Principe Joint 
Development Zone (N-STP JDZ) farther west in the Gulf 
of Guinea, or the border agreement between Nigeria and 
Equatorial Guinea. 
 
 
5.  (U) During a November visit to Calabar, Econoff was 
informed that very little non-oil economic activity 
exists in and around the Bakassi Peninsula.  The people 
of Bakassi live in small villages and subsist mostly by 
fishing from small wooden boats resembling long canoes 
rowed into the Bight of Bonny.  There is no organized 
fishing industry in the region. 
 
 
6.  (U) While in south-east Nigeria, Econoff attended a 
conference in Akwa Ibom state in which the Bakassi 
ruling was addressed in a question and answer session 
following a presentation on environmental issues.  Some 
anger over the loss of Bakassi was voiced by the 
audience of approximately 1500, and it was asserted 
that roughly 75 percent of the Nigerians now living in 
Bakassi are of Akwa Ibom origin. Population estimates 
range from 30,000 to 300,000, with anything over 
100,000 improbable. Beyond expressing a sense of 
solidarity with their kin, conference participants 
conjectured that if many Bakassi residents chose to 
return to Akwa Ibom state, the repatriation would be 
very taxing on the state's infrastructure and its 
communities' social structures, which will necessitate 
a repatriation plan and funding from the federal 
government. 
 
 
7.  (SBU) Although definitely a minority, some economic 
editorialists and private sector consultants have 
opined that the ICJ ruling provides an overall economic 
benefit to Nigeria.  They note that while Cameroon was 
awarded the land territory of Bakassi and disputed 
areas around Lake Chad, it did not win the offshore 
boundary lines it sought.  Some analysts further 
speculate that the territory maintained by Nigeria as a 
result of the ICJ ruling holds more than 10 billion 
barrels of crude oil, especially at its boundary with 
Equatorial Guinea.  Because there is now a ruling by an 
international body delineating an offshore boundary, 
and that boundary is not detrimental to Nigeria's long- 
term economic interests, the political risk in the 
region is substantially reduced.  With reduced 
political risk, private firms may develop the region 
with confidence that the concessions they negotiate 
with one country or the other will be secure. 
 
 
8.  (SBU) Several international oil company executives 
told Econoff that they nonetheless remain reluctant to 
explore or develop the region until all public 
controversy has abated and a mutually satisfactory 
understanding between the countries is achieved. 
ExxonMobil officials deduce that if Nigeria ever 
believed that the oil reserves off Bakassi were 
commercially exploitable, it would have drilled in the 
region from 1994 to the present as Cameroon did. Given 
that most of the wells already drilled in the disputed 
region are dry or non-producing, and the GON has told 
the oil companies they should not expect increases in 
development funds in the 2003 budget, there seems to be 
little incentive to begin or expand serious development 
in the waters off Bakassi in the near future. 
 
 
9.  (SBU) COMMENT: Some media reports speculated that 
Obasanjo had miscalculated regarding the outcome of the 
case.  However, Mission interaction with GON decision- 
makers in advance of the ruling and after it was 
announced indicates that the GON was aware the ICJ 
likely would award Bakassi to Cameroon.  Given the 
years-long drumbeat of "Bakassi is Nigerian," the GON 
could not take steps to prepare its people in the weeks 
immediately before the ruling was announced.   Rather, 
the GON had to await the ruling, gauge the level of 
public unhappiness, and respond accordingly. 
 
 
10.  (SBU) COMMENT CONTINUED:  Although "oil-rich" is 
the modifier placed in front of virtually every mention 
of the word "Bakassi" in the Nigerian media, pundits do 
not focus on resources or access to the Cross River's 
deepwater channel.  Rather, journalists emphasize on 
the sufferings of individuals at the hands of 
Cameroonian gendarmes and the essential principle of 
national integrity and indivisibility.  Bakassi must be 
Nigerian, the theme goes, because its inhabitants 
always were, are and ever will be Nigerian, and it is 
the duty of a government to protect the interests of 
its citizens.  In short, no matter how much discussion 
there may be about natural resources, Nigeria's 
interest in retaining control of Bakassi is founded not 
on economic interests or even concerns about its naval 
vessels being able to reach the Port of Calabar but 
rather on a mixture of national pride and concern for 
the fate of the peninsula's inhabitants. 
 
 
11.  (SBU) With the approach of the April presidential 
election, opposition candidates may try to use the ICJ 
ruling to embarrass the Obasanjo administration.  A 
Nigerian-Cameroonian commission, facilitated by the UN 
Secretary General, has been formed to attempt to 
 
SIPDIS 
resolve Nigerian concerns over the ICJ ruling.  The 
commission held its first meeting in Yaounde in early 
December, but an agreement on any substantive point 
likely awaits the post-election period, as the 
President cannot to make any concession before voters 
go to the pools; thereafter, he can move but may still 
proceed very deliberately, in order to put this issue 
to rest without provoking new outcry. 
 
 
HINSON-JONES