Spike in piracy spells disaster for Nigeria’s oil, gas industry

The rising incidence of piratical attacks on oil vessels and crew members in Nigeria, which has assumed unprecedented dimension in recent times, could further cause the oil and gas industry a heavy loss of investment even as the delay in the passage of Petroleum Industry Bill (PIB) has made several oil majors hold back on investments

Nigeria accounted for 27 incidents in 2012, with four vessels hijacked, 13 vessels boarded, eight fired upon and two attempted attacks. Only 10 incidents were reported in 2011, including two hijackings, according to the International Chamber of Commerce (ICC) International Maritime Bureau (IMB) global piracy report.

Analysts said the rise in piracy attacks in the country, especially as pirate gangs hijack large tankers at sea, siphoning off their oil cargoes into smaller ships, could impact negatively on this year’s earnings from oil, perpetuating years of industry stagnation.

In what is the latest attack off the coast of the country, pirates

attacked an oil industry supply vessel in Nigerian waters last week and kidnapped three crew members, it was learnt.

The captain, chief engineer and second engineer were abducted on Monday when gunmen boarded the Malaysia-flagged Armada Tuah 22 around 50 nautical miles (90 km) off the coast of the Brass region in the Niger Delta.

The vessel is a tugboat contracted to supply an offshore oil platform.

This year has seen a spike in piracy off Nigeria’s oil-rich coast, which according to a February 21, 2013 Reuters report, has shown gangs are willing to venture further afield and use more violent tactics, increasing the risk of doing business in the country.

Last month, Oil majors Exxon Mobil and Shell noted that Nigeria has become one of the most expensive oil-producing countries to operate due largely to security.

Oil and shipping companies have to hire crisis management teams, pay higher insurance premiums and face the prospect of ransom payments, as well as brace themselves for damage to their reputations,

says the report.

There were no fewer than five attacks in the nation’s territorial waters last month. In one of the attacks, pirates demanded a N200 million ($1.3 million) ransom for the release of six foreigners kidnapped.

Tom Patterson, maritime risk analyst at Control Risks was quoted by Reuters to have said: “The recent upsurge in maritime kidnaps off the Niger Delta … has not been witnessed since 2010”.

The prime suspects for most attacks are Nigerian oil gangs, who already carry out industrial scale crude theft called ‘bunkering’ in the restive onshore Niger Delta swamps.

Oil minister recently said that oil theft, which can amount to 150,000 barrels per day (bpd), was the work of an international criminal syndicate.

But security experts believe that Nigerian security officials and politicians are complicit in oil theft and piracy.

“There are many top people in Nigeria involved in commissioning these attacks and sharing the profits”, said Michael Frodl, head of U.S. consultancy C-Level Maritime Risks

FEMI ASU