Given the region’s location on the Atlantic, allowing direct supplies to the United States without the dangers plaguing Middle Eastern exports, the region is expected to provide the United States with about one-quarter of its crude imports by 2015.
Most of the attacks involve theft, particularly large amounts of oil, rather than hijackings for ransom, the primary tactic used by the Somali pirates.
“Gulf of Guinea attacks have been targeted almost solely against oil- and diesel-carrying vessels,” Oxford Analytica noted in a recent report.
So any serious threat to supplies could have an impact in the United States.
Lately I have been focused on oil related stories. The reason for that is there are a lot of factors in play right now that could severely impact the world oil markets. So it pays to take a look at where we get oil, and the stability of this source.
Also, where there is a security issue and private interests at stake, then usually you will see private security involved in some capacity. From managing a guard force, to security assessments, to protecting assets and individuals, private security is very much involved. Security contractors are extremely important to the world wide effort of securing these oil related efforts, and the world is not getting any safer.
The focus here is on oil imports to the US, and there are a few imports out there that deserve some attention. I focus on the US because I am citizen there, but it is also important to follow what impacts the US because often times news there impacts the rest of the world. For the record, here are our top import sources.
Canada (25%)
Saudi Arabia (12%)
Nigeria (11%)
Venezuela (10%)
Mexico (9%)
Looking at this list, you can see exactly what I am talking about. Saudi Arabia is located in a region that is certainly threatened by the aspect of war and revolution (Iran or Arab Spring comes to mind). We depend on Saudi Arabia’s security apparatus to protect this oil production. Just imagine if Iran bombed refineries there for some kind of retaliatory attack against the west, if Israel bombs Iran? Other import sources would all of sudden become very important.
Or look at Venezuela where the leader there actively promotes his hatred of all things US, and goes out of his way to make partnerships with countries like Iran, just to thumb their nose at the US. Amazing that we are still doing business with this country. But they have oil.
Then look at Mexico with the drug war and constant attacks on their nationalized oil company called Pemex? What would happen if cartels started attacking oil rigs or Pemex as a retaliation against the US drug war effort? Or terrorists targeted these assets as a way of hurting the US?
Luckily imports from Canada are stable and secure, but that is about it. Now let’s put this into perspective. Imagine if any one of these top importers had their oil infrastructure attacked and disrupted by a nation or a group? The shock wave to the world oil markets would be severe, and the pain would definitely be felt economically in the US. That is why I follow this stuff. In my view, the more we can shore up energy independence, the better. But let’s keep this focused on the reality that we have, and not the one we wished we had.
So the importer that I want to focus on today is Nigeria. There are a few things to look at here for system disruptions. The first is piracy. Off the western coast of Africa, things are now getting bad enough to raise some alarms. Lloyds Market Association puts the waterways near Nigeria in the same risk category as Somalia’s.
Lloyd’s Market Association, a London umbrella for a group of insurers, listed Nigeria, Benin and nearby waters in the same risk category as lawless Somalia. That could signal higher insurance rates for shipping, including oil traffic, off West Africa.
Both the coastal region and the deltas/waterways are all hunting grounds of pirates seeking to capture oil tankers or hostages, and there is an upward trend for this activity.
Below, I posted a story that talked about a private public partnership that Nigeria is taking on in order to deal with this issue. The Nigerian Maritime Administration and Safety Agency has recently contracted with a company called Global West Vessels Specialist Nigeria Limited. Here is the basics of this deal, which is valued at $103 million.
“What the government has done is simply address issues of maintenance bureaucracy that had crippled the patrol arm of NIMASA. By the partnership agreement NIMASA has asked a private firm to supply patrol boats, surveillance equipment and also maintain them. NIMASA and the NAVY will use these facilities to protect the nation’s maritime domain”, he explained.
I don’t know anything about this company or public private partnership. So I couldn’t even say if this group is an honest partner in the deal, or if it will be effective. We will see….
The second thing to look at are these militant groups who target the oil as part of their strategy. Groups like MEND did a number on oil infrastructure there. Shell has also invested much into security in order to protect their investments and operations there, and from the sounds of it, MEND is wanting to get back into the game of system disruptions.
You also have the Islamist extremist angle. Boko Haram comes to mind as just such a group that could increase their systems disruption attacks as a strategy to coincide with the increased demand for oil throughout the world. Meaning if the west depends upon the oil coming from Nigeria, then what better way to hurt the west and Nigerian government by attacking the oil. This is not a new idea and I discussed how Al Shabab is targeting western oil interests in Somalia as another example of this kind of thing. (notice that private security is a necessity to counter the threat in both countries)
Finally, I picked up on this little part of an article below and this is interesting to me. Liberia and Sierra Leone could turn into another source of oil. Check it out.
U.S. company Anadarko Petroleum Corp. and oil companies have reported new discoveries off Liberia and Sierra Leone in recent weeks, heightening expectations that the war-scarred region is heading for a major bonanza.
So with that said, will we see Royal Dutch Shell and similar companies respond with setting up security that looks more like a private military force? Will we see a drive to promote armed guards on all boats operating off the west coast of Africa? Who knows and it is something to watch as events unfold in this region of the world. –Matt
Nigerian Delta Unrest Cuts Oil Output by 1 Million Barrels
By Elisha Bala-Gbogbo
Mar 5, 2012
Oil production in Nigeria, Africa’s biggest producer, is down by about 1 million barrels a day because of violence and theft in the Niger River delta, according to the state oil company.
Output is yet to be restored at 40 onshore oil fields mostly operated by Hague-based Royal Dutch Shell Plc (RDSA), San Ramon, California-based Chevron Corp. (CVX) and smaller producers more than two years after a government amnesty led to the disarming of thousands of militants and a decline in attacks on oil companies, according to data obtained from the Nigerian National Petroleum Corp.
The “underlying tensions that mark the region were decades in the making and have yet to be resolved,” Antony Goldman, head of PM Consulting, a London-based risk advisory specializing in West Africa, said today in an e-mailed response to questions. “The concern among oil companies is that there is a risk of a slide back to violence if stakeholders do not seize the opportunity presented by the current relative calm to begin to build a better and fairer future for the Niger delta.”
(more…)