With more violence from militants and further oil-worker abductions expected ahead of Nigeria's presidential election next April, energy firms are poised to take tougher security measures to protect workers and spend more money to compensate staff in the increasingly volatile region, security and energy analysts say.
Already, violence and the threat of it have reduced oil production by roughly 700,000 barrels a day, or about 39% of the country's current total output. If the violence continues or increases, companies may be forced to curtail even more production and take more drastic steps to protect workers and infrastructure.
Onshore production has been mired repeatedly over the years in violent clashes with communities, but militants and criminal gangs have recently ventured further out to sea.
That threatens multibillion dollar offshore projects that companies like Royal Dutch Shell PLC (RDSA.LN) and Exxon Mobil Corp. (XOM) are counting on to boost oil reserves and profits at a time of stiff competition with state-run energy firms in other parts of the world.
The offshore oil fields are also crucial for Nigeria if it is live up to its sharply higher oil output forecasts over the next few years.
The killing of an expatriate oil worker last week during a botched military hostage-rescue effort sharply ratcheted up the stakes for international oil companies. Executives will have to convince their own employees and governments back home that they are doing everything they can to protect workers in Nigeria.
"We're at the point that the whole security apparatus in Nigeria is in question, including the offshore," said Sebastian Spio-Garbrah, a New York-based Africa analyst at Eurasia Group.
Oil companies "are in a real conundrum," he said. "Staff are more vulnerable, the military is unable to prevent these attacks and they're also having to pay more to keep workers on the ground and insure them."
One security consultant familiar with some of the oil companies' operations said they have been paying higher "combat-zone" compensation and insurance premiums to keep staff on the ground.
"There are guns on the premises at company sites, at facilities and the compounds where the staff live. It's very common. The companies need to protect their staff," said one oil industry official in Nigeria.
That could be an explosive mix. Companies may be pressured to rely more on their private security staff to repel attacks, this official said. "They (the companies) have to protect their workers, and it's not being done by the government," the official said.
Earlier this month, the U.S. consulate in Lagos warned about the possibility of coordinated attacks on oil installations in the Niger Delta, underscoring the perception among diplomats and outside observers that the violence is likely to increase ahead of Nigeria's 2007 general election in April.
David Hunt of the U.K. was killed last Wednesday after Nigerian security services tried to rescue a group of workers kidnapped hours earlier from an offshore production vessel about 30 miles offshore. The vessel was operated by Eni.
Hmmmmm.... right...... and I'm sure the employees of both CHC and Bristow are highly impressed with all the extra pay they receive and the high degree of personal security provided for them by their employers - NOT
. Previous comments are right in that the oil companies refuse to accept responsibility for contracting companies security now, whilst they sit in their very secure residential compounds. The management of CHC and Bristow say they can't afford to pay for secure compounds like Intels (except for 2 CHC managers
) because the oil companies are not paying enough. Well, why don't they present a united front front to these oil company bullies, do like Willbros and simply say that in 3 months they're going to pull out of Nigeria unless the oil companies pay them enough for their staff to be housed somewhere with the same degreee of safety the oil company staff enjoy?
In the meantime both companies need to get their collective digits out of their behinds and start paying the extra salary other companies are paying to their employees in this dangerous part of the world. Nigeria is now well up in the list of the top 10 countries where expats are likely to be kidnapped.
