x Abu Dhabi, UAETuesday 25 July 2017

Nigeria oil union threats production shutdown over subsidy strikes

A union representing 20,000 oil and gas workers in Nigeria threatened it would shut down all production starting on Sunday to take part in the crippling nationwide strike over spiralling fuel prices.

Nigerians carry a mock coffin of President Goodluck Jonathan on the fourth day of protesting of the scrapping of fuel subsidies.
Nigerians carry a mock coffin of President Goodluck Jonathan on the fourth day of protesting of the scrapping of fuel subsidies.

LAGOS // A union representing 20,000 oil and gas workers in Nigeria threatened it would shut down all production starting on Sunday to take part in the crippling nationwide strike over spiralling fuel prices.

The strike began on Monday after the Nigerian government reversed a two-decade-long popular subsidy programme that had kept gas prices low for Nigerian consumers. Anger over the government's decision has led to demonstrations across Africa's most populous nation, and related violence has left at least 10 people dead.

A statement by the Petroleum and Natural Gas Senior Staff Association of Nigeria said if the government does not restore the subsidies, the union will be "forced to go ahead and apply the bitter option of ordering the systematic shutting down of oil and gas production".

Nigeria is the fifth-largest oil exporter to the United States, and losing those supplies would force American refineries to replace 630,000 barrels of crude per day.

The effect of the Nigerian government's subsidy removal has been dramatic: gas prices in Nigeria more than doubled overnight, causing transportation and food costs to rise as well for a nation where most live on less than US$2 (Dh7.34) a day.

Yet oil, extracted mostly offshore by foreign firms or by automated onshore systems, keeps flowing to other countries. Now unions are threatening to try to disrupt those operations.

Even if production is slowed, though, oil in inventories could continue to supply foreign markets for a time.

"A complete shutdown, if carried out, is likely to have a rather large detrimental effect on Nigerian output, even though exports could continue from their inventories in the short term," the financial institution Barclays Capital recently said.

Nigeria produces about 2.4 million barrels a day from the swamps of its southern delta to massive offshore oilfields. Oil accounts for up to 80 per cent of revenues in Nigeria.

The president insists removing the subsidy was necessary to save the country an estimated US$8 billion (Dh29.4bn) a year - money which he promises will go toward badly needed road and public projects. However, protesters distrust the government, and say it should first cut corruption in a nation where military rulers and politicians have stolen billions of dollars.

The strike has closed Lagos' Apapa Port, cutting off cargo shipments. Air carriers have cancelled international flights. Businesses that defy the strike and stay open face the risk of being overrun by labour activists, who already have warned anything they find inside will be redistributed.

Thus far, the oil industry has remained largely removed from typical business in the country. Many of its operations are automated, both for efficiency and to avoid having staff work in the Niger Delta's maze of creeks, where criminal gangs and militants kidnap workers for ransoms. Foreign companies also run large offshore fields, far from the streets and chaos of growing demonstrations across the country.