Plan for Nigeria Met With Jitters
Oil Region, but Some
Fear Aid Could Backfire
July 22, 2008; Page C2
U.K. Prime Minister Gordon Brown has declared that Britain might offer military aid to Nigeria to help stabilize the country’s restive oil-producing region.
![[Gordon Brown]](https://i0.wp.com/s.wsj.net/public/resources/images/HC-GL918_Brown_20080427090538.gif?resize=136%2C230)
But before bringing calm to the African nation’s energy infrastructure, he might need to sooth the jitters about the plan in his own backyard.
Some oil traders and other market participants in London fear any U.K. military involvement in the Niger Delta will serve to increase hostilities, leading to further disruption of production and higher futures prices.
“It seems inevitable it will cause more disturbance,” said a London-based trader of West African crude.
Militants in Nigeria might use the arrival of British troops as an excuse “for another fireworks display,” said Olivier Jakob, an analyst at Switzerland-based energy consulting firm Petromatrix.
Nigerian crude is prized by refiners around the world for its high quality, but the pipeline systems that bring it in from the oil fields have been repeatedly sabotaged, disrupting an estimated one million barrels a day of production in recent weeks.
![[Letter from the City]](https://i0.wp.com/s.wsj.net/public/resources/images/MI-AR471_LET_CI_20080721191125.jpg?resize=245%2C184) |
| Reuters |
| Sabotage in Nigeria included this January 2008 bomb attack on an oil tanker. |
The vast majority of that crude would have been bound for export, with more than 50% going to the U.S and 20% to Europe.
Although very little Nigerian crude is exported to the U.K., Nigerian oil is heavily traded in London’s spot market.
Prices for the West African crude are valued against a basket of North Sea crudes, since oil yields from the two regions are of comparable quality.
When production is interrupted in West Africa, buyers seek to replace that supply with a North Sea alternative, driving Brent crude higher on the ICE Futures exchange. Prices on Nigerian oil cargoes and crude futures in London climbed on the back of news of the prime minister’s plans.
Oil prices world-wide fell substantially last week, but the losses were less steep on shipments of Nigerian crude.
Mr. Brown has said he stands ready to help Nigerians “deal with lawlessness” in the Delta and restore the country’s lagging production.
Some of Mr. Brown’s critics have labeled the initiative an attempt by an unpopular leader to be seen tackling sky-high energy prices.
Sebastian Spio-Garbrah, an analyst at energy consulting firm Eurasia Group, said that while the Brown proposal probably was well-intentioned, it risked heightening violence against U.K. oil interests in the region.
Anglo-Dutch oil major Royal Dutch Shell is one of the largest operators in Nigeria’s oil sector, along with Exxon Mobil and Chevron of the U.S. and Italy’s Eni.
Violent attacks and kidnappings have become so frequent throughout the Delta during the past two years that the situation is at a crisis point for workers, with a major union of Nigerian oil workers threatening to pull all its members out of the area over mounting security worries.
Write to Angela Henshall at [email protected]
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