[R-G] Plan for Nigeria Met with Jitters: Brown Wants to Calm Oil Region, but Some Fear Aid Could Backfire
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Tue Jul 22 20:45:26 MDT 2008
LETTER FROM THE CITY
Plan for Nigeria
Met With Jitters
Brown Wants to Calm
Oil Region, but Some
Fear Aid Could Backfire
By ANGELA HENSHALL
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
But before bringing calm to the African nation's energy
infrastructure, he might need to soothe jitters about the plan in his
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
"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.
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
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
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
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
Write to Angela Henshall at angela.henshall at dowjones.com
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