Nigerian union threatens oil production shut down

A major union threatened to stop the beating heart of Nigeria's economy — crude oil production — as part of a nationwide strike and protests gripping Africa's most populous nation. World oil prices climbed on Thursday on the news. Nigeria is the fifth-largest oil exporter to the US, and a shutdown would force American refineries to replace 630,000 barrels per day of crude. The union's ability to enforce a shutdown, expected to begin tomorrow, across the swamps of Nigeria's southern delta to its massive offshore oil fields, remains in question. But the threat of a strike caused jitters on global oil markets as traders worldwide worried. Nigeria has been paralysed by a strike that began on Monday after President Goodluck Jonathan's government abandoned subsidies that kept gasoline prices low. Overnight, prices at the pump more than doubled, from $1.70 (Dh6.24) per gallon (45 cents per litre) to at least $3.50 per gallon (94 cents per litre). The costs of food and transportation also doubled in a nation where most people live on less than $2 a day. ‘Bitter option' Anger over losing one of the few benefits average Nigerians see from being an oil-rich country, as well as disgust over government corruption, have led to demonstrations across this nation of 160 million people and violence that has killed at least ten people. The Petroleum and Natural Gas Senior Staff Association of Nigeria, which represents about 20,000 workers, said it would be forced to "apply the bitter option" of closing down all oil and gas production if the government refused to reinstate the gasoline subsidies. Union president Babatunde Ogun said if fields are shut down, it could take six months to a year to restart them. "We... believe that if everything comes to a standstill, the government will budge," Ogun told reporters in Lagos. Petrol dollars dominate Nigeria's economy and represent the majority of its government revenues. Ogun also said a natural gas shutdown would turn off the nation's power grid, which is already in shambles. When pressed about how the threatened shutdown could affect the automated parts of the industry, Ogun did not offer an answer. Most oil firms, including the dominant Royal Dutch Shell, say they are monitoring the situation. Kenneth Arnold, an independent petroleum consultant and former Shell engineer, said it "would be very easy to shut down" Nigeria's oil fields. Bringing in replacement workers to run the fields raises dangers, he said. ‘Local bad guys' "It may not be safe to stay there," Arnold said. "In Nigeria, people get killed in the oil fields. There are local bad guys who want a share of the action." Other companies with subsidiaries in Nigeria include Chevron Corp., Exxon Mobil Corp., Italy's Eni and French firm Total, which operate in tandem with the state-run Nigerian National Petroleum Corp. Levi Ajuonoma, a spokesman for the state-run oil firm, said it had not adjusted its production and shipping forecasts over the strike. It will take time for Nigeria's government coffers to feel the impact of the lost revenue, as oil and natural gas cargoes go out months ahead. That means, at least in the short term, supply to the US would not be affected. However, a shutdown could impact futures oil prices on global stock markets — potentially raising the cost of gasoline for US consumers. Government talks to resume today Negotiations between labour and the government ended on Thursday night without any announcement. Officials said they would resume today. So far, Nigeria's oil industry hasn't felt the effects of the national strike. 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 target workers for high-dollar kidnappings. Foreign companies also run large offshore fields, far from the chaos of growing demonstrations across the country. Shipments from offshore platforms move immediately to market.