Union threatens oil production over Nigeria strike

Associated Press
Comrade Babatunde Ogun, centre, President Petroleum and Natural Gas Senior Staff Association of Nigeria, sing solidarity songs during a press conference on the removal of a fuel subsidy by the government in Lagos, Nigeria, Thursday, Jan. 12, 2012. A union representing 20,000 oil and gas workers in Nigeria threatened Thursday it would shut down all production starting Sunday to take part in the crippling nationwide strike over spiraling fuel prices. (AP Photo/Sunday Alamba)
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Comrade Babatunde Ogun, centre, President Petroleum and Natural Gas Senior Staff Association of Nigeria, sing solidarity songs during a press conference on the removal of a fuel subsidy by the government in Lagos, Nigeria, Thursday, Jan. 12, 2012. A union representing 20,000 oil and gas workers in Nigeria threatened Thursday it would shut down all production starting Sunday to take part in the crippling nationwide strike over spiraling fuel prices. (AP Photo/Sunday Alamba)

LAGOS, Nigeria (AP) — A major union promised Thursday to stop the beating heart of Nigeria's economy — crude oil production — as part of a nationwide strike and protests gripping Africa's most populous nation.

The union's ability to enforce the shutdown Sunday across the swamps of Nigeria's southern delta to massive offshore oil fields remains in question, though the threat of a strike could sway global oil prices with traders worldwide concerned about supply.

Nigeria, home to more than 160 million people, has been paralyzed by a national strike that began Monday after the country's government abandoned subsidies that kept domestic gasoline prices low. Overnight, prices at the pump more than doubled, from $1.70 per gallon (45 cents per liter) to at least $3.50 per gallon (94 cents per liter). The costs of food and transportation also doubled.

Popular anger over losing one of the few benefits average Nigerians see from being an oil-rich nation, as well as disgust over government corruption, has led to demonstrations nationwide and related violence that has killed at least 12 people.

The Petroleum and Natural Gas Senior Staff Association of Nigeria, which represents about 20,000 workers, announced Thursday it would "be forced to go ahead and apply the bitter option of ordering the systematic shutting down of oil and gas production" if the government refuses to reinstate the gas subsidies. Union president Babatunde Ogun said if fields are shut down, it could take "six months or one year" to restart them.

"We ... believe that if everything comes to a standstill, the government will budge," Ogun told journalists in Lagos. Petrol dollars dominates Nigeria's economy and represents the majority of its government revenues.

Ogun also said the natural gas shutdown would turn off the nation's power grid, which is already in shambles.

The oil industry so far hasn't felt the effects of the national strike. 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 target workers for high-dollar kidnappings.

Foreign companies also run large offshore fields, far from the streets and chaos of growing demonstrations across the country. Shipments from offshore platforms move immediately to market.

But if something breaks, if the pressure in the well fluctuates, or if countless other problems occur that cause an automatic system shutdown, there wouldn't be anyone there to check and get production running again.

When pressed about how the union could affect the automated parts of the industry, Ogun did not offer an answer.

Most oil firms, including the dominant Royal Dutch Shell PLC, say they are monitoring the situation. Kenneth Arnold, an independent petroleum consultant and former Shell engineer, said it "would be very easy to shut down" Nigeria's oil fields. Bringing in workers to run the fields raises dangers, he said.

"It may not be safe to stay there," Arnold said. "In Nigeria, people get killed in the oil fields. There are local bad guys who want a share of the action, and they have a little rebellion and kill a few people."

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 had not adjusted its production and shipping forecasts over the strike. It would take time for the nation to feel the impact of the strike, as oil and natural gas cargoes go out months ahead, meaning that supply would be available for the U.S.

However, it still could affect futures prices of oil on stock markets — potentially raising the cost of gasoline for the consumer. Global oil prices rose when militants began several years of attacks on oil companies and crude oil pipelines in 2006.

Benchmark oil prices rose by $1.03 to $101.90 per barrel Thursday in electronic trading on the New York Mercantile Exchange, the increase caused by 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 growing protests and attacks from a radical Islamist sect are increasing pressure on this young democracy that has a history of military rulers.

"The subsidy issue provokes such strong emotions because it is viewed as one of the few benefits that Nigerians receive from living in an oil-producing nation," said Barclays Capital, a financial institution. "If the protests continue or gain momentum, they will pose a major challenge to the Jonathan government and potentially exhaust the capacity of an administration already facing a sustained security threat."

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AP Energy Writer Chris Kahn in New York contributed to this report.

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Jon Gambrell can be reached at www.twitter.com/jongambrellAP.

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