Nigeria violence escalates

Friday , January 13, 2012 - 2:43 PM

Yinka Ibukun

LAGOS, Nigeria-- A major union representing Nigerian oil workers said Thursday it would shut down all production Sunday as part of a nationwide strike now paralyzing a country vital to U.S. oil supplies.

It is unclear how large an effect the planned shutdown by the Petroleum and Natural Gas Senior Staff Association of Nigeria will have. However, oil prices rose Thursday over concerns about global supplies -- meaning even the threat could be enough to push prices higher.

The strike began Monday after the Nigerian government reversed a two-decade-long popular subsidy program that had kept gas prices low for Nigerian consumers. Anger over the government's decision has led to demonstrations across Africa's most populous nation, and related violence has left at least 12 people dead.

A statement Thursday by the Petroleum and Natural Gas Senior Staff Association of Nigeria said that if the government does not restore the subsidies, the union will be "forced to go ahead and apply the bitter option of ordering the systematic shutting down of oil and gas production."

Benchmark oil prices rose by $1.03 to $101.90 per barrel Thursday in electronic trading on the New York Mercantile Exchange. Prices rose on concerns of global supplies.

Nigeria is the fifth-largest oil exporter to the United States, and losing those supplies would force American refineries to replace 630,000 barrels of crude per day.

The impact of the Nigerian government's subsidy removal has been dramatic: Gas prices in Nigeria more than doubled overnight, causing transportation and food costs to rise as well for a nation where most live on less than $2 a day.

Yet oil, extracted mostly offshore by foreign firms or by automated onshore systems, keeps flowing to other countries. Now unions are threatening to try to disrupt those operations.



Even if production is slowed, though, oil in inventories could continue to supply foreign markets for a time.

"A complete shutdown, if carried out, is likely to have a rather large detrimental effect on Nigerian output, even though exports could continue from their inventories in the short term," financial institution Barclays Capital recently said.

Nigeria produces about 2.4 million barrels a day from the swamps of its southern delta to massive offshore oil fields. Oil accounts for up to 80 percent of revenues in Nigeria, a nation of more than 160 million people.

The president insists removing the subsidy was necessary to save the country an estimated $8 billion a year -- money which he promises will go toward badly needed road and public projects. However, protesters distrust the government, and say it should first cut corruption in a nation where military rulers and politicians have stolen billions of dollars.

The strike has closed Lagos' busy Apapa Port, cutting off cargo shipments. Air carriers have canceled international flights. Businesses that defy the strike and stay open face the risk of being overrun by labor activists, who already have warned anything they find inside will be redistributed.

Thus far, the oil industry has remained largely removed from typical business in the country. 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 kidnap workers for ransoms. Foreign companies also run large offshore fields, far from the streets and chaos of growing demonstrations across the country.

Most oil firms, including the dominant Royal Dutch Shell PLC, say they are monitoring the situation. Other companies with subsidiaries working in Nigeria include Chevron Corp., Exxon Mobil Corp., Italy's Eni SpA and French firm Total SA, which operate in tandem with the state-run Nigerian National Petroleum Corp.

Levi Ajuonoma, a spokesman for the state-run firm, said it has not adjusted its production and shipping forecasts over the strike.

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Associated Press writer Jon Gambrell and AP Energy Writer Chris Kahn in New York contributed to this report.

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