OIL COMPANIES DIFFER ON RESTARTING WARRI

C O N F I D E N T I A L SECTION 01 OF 02 ABUJA 001908 SIPDIS NOFORN E.O. 12958: DECL: 11/01/2013 TAGS: PGOV EPET PINS NI SUBJECT: OIL COMPANIES DIFFER ON RESTARTING WARRI PRODUCTION REF: A. ABUJA 1761 ¶B. ABUJA 1656 Classified by Political Counselor James E. Maxstadt for reasons 1.5 (b) and (d). ¶1. (C/NF) Summary: Shell's October resumption of oil production in Warri has highlighted a widening split between the Anglo-Dutch oil firm and Chevron on how to manage relations with local Ijaw and Itsekiri communities, and how to maintain security. Shell put its money into increasing the Nigerian military presence at its facilities and contracting some local communities for more security, and is now basking in self-confidence, having restarted two-thirds of the production lost since March. Chevron has refused such a piecemeal approach, arguing instead for a comprehensive security or political/security resolution for the region, and is now sitting on the sidelines counting its losses, vandalized facilities, and soured community relations. That wheel could turn again, however, when the volatile area erupts in new violence. End Summary Restoring Shell's Production -------------- ¶2. (C/NF) Over the past month, Shell has brought back on line over 100,000 barrels per day (bpd) of 150,000 bpd previously shut down in the Warri swamps. Shell accomplished this largely through the substantial support of the Nigerian military's Joint Task Force (JTF) implementing "Operation Restore Hope," which is commanded by BGEN Zamani and which has an estimated 3,000 troops in the Warri area. Five out of seven Shell flow stations forced to close after the outbreak of Ijaw-Itsekiri fighting in March 2003 have now been restaffed and reopened, each with attendant military deployments. These include Egwa-1, Egwa-2, and Otumaru. The key Jones Creek flow station, which is close to the Ijaw militants' base in Okenrenkok, remains closed, though Shell plans to reopen this facility in the coming weeks. Shell's Military Support -------------- ¶3. (C/NF) In meetings with Mission officers, Shell security officials disclosed Shell's provision of substantial logistical support for Operation Restore Hope, including boats, vehicles and the occasional use of Shell helicopters for reconnaissance of the swamps. One Shell official intimated that the company has acceded to the Joint Task Force's request for several million dollars to support the troops and other elements of Operation Restore Hope. Chevron officials insist Shell is paying, while claiming that they have received similar requests from JTF Commander Zamani but turned them down. ¶4. (C/NF) In specific support of Shell's return to the flow stations closed after March, groups of 50-80 JTF personnel have deployed to each of the reopened sites. According to Shell's own security manager for the Warri area, and confirmed by General Zamani, Shell provides these JTF personnel with accommodation on Shell houseboats, and with board and stipends for the hardship of their posting deep in the swamps. The JTF soldiers stationed at the Shell sites are tasked with other missions in addition to protecting the company's assets. During a meeting with CRO in mid-October, General Zamani confirmed that the personnel assigned to the Shell sites are expected to support all of the objectives of Operation Restore Hope, and could be called on to patrol the waterways, pursue suspected militants and search for arms caches. ¶5. (C/NF) In discussing the Joint Task Force's plans in the coming weeks, General Zamani disclosed that he is attempting to establish a permanent forward base in Okerenkoko, currently the base of FNDIC (Ijaw) militants. The General claimed that he would attempt to "negotiate" a military presence there through talks with community leaders. (COMMENT: Military action against the militants here could become a flashpoint, possibly leading to enhanced security as well as probably leading to many civilian casualties. Repeating Bad Habits: Buying off Communities -------------- ¶6. (C/NF) In order to mollify local unhappiness over the deployment of military troops at the various reopened Shell sites, Shell community liaison officers have been offering new contracts to various communities, according to local NGOs. While the details of these contracts are not known, the contracts largely involve the community youth providing security or surveillance of Shell facilities -- the same sort of "protection racket" that historically in the Delta has provoked have nots to fight haves, and ultimately encouraged a culture of extortion among otherwise idle youth against other villages and more recently against the companies themselves. Chevron Won't Play -------------- ¶7. (C/NF) Chevron officials have long stated their concerns over the unsettled security situation in the Warri swamps and have indicated a great reluctance to return to the abandoned flow stations and wells. Where in the past they too have provided development aid to some communities, and worked with some local commanders, they now want a comprehensive solution for the Delta. What was initially an informal preferred option by some within the company appears now to have been formalized as corporate policy. Chevron's corporate security advisor in Nigeria, Hamish MacDonald, claims that Chevron will stay out of on-shore production in Warri until the federal government brings the law-and-order situation in the area up to a level assuring the company of a minimum level of safety, noting that Chevron suffered hundreds of millions of dollars in damage to two flow stations vandalized by Ijaw militants in March and April. In its efforts to pressure the highest levels of the GON to take the necessary steps to establish the rule of law in the Delta, MacDonald stated, Chevron will be asking the Embassy and Department for assistance. ¶8. (C/NF) Despite the reversion by Shell to past divisive practices, or perhaps because of it, the attitude of most in the swamps of Warri is now relatively positive towards Shell and very critical of Chevron. That may begin to change as the military, funded in part by Shell and often basing from Shell sites, increases its operations to disarm militants. Ill feelings towards Chevron are largely the result of the company's absence from the area since March; the communities are feeling the absence of Chevron's contracts. U.S. Award to Chevron -------------- ¶9. (C/NF) Along similar lines of self-interest, both Itsekiri and Ijaw groups have criticized the Secretary's "Corporate Excellence" award to Chevron in Nigeria. Youth leaders among the Itsekiri -- ironically the ethnic group that received Chevron's corporate benevolence evacuating them -- visited the Embassy October 30 and criticized Chevron for failing to help Itsekiri refugees return to their villages around Chevron installations. The Itsekiri were unhappy with Chevron receiving the award, Itsekiri youth leader Lucky Akaruese claimed, but were particularly upset by the Abuja ceremony at which the award was presented to Chevron's Managing Director, Jay Pryor. Akaruese complained that few Itsekiri were invited to the event and that Pryor was flanked by two chiefs of the Ijaw -- the tribe that destroyed over 50 Itsekiri villages and two of Chevron's flow stations -- while giving his remarks on Nigerian television. Ijaw youth leaders have criticized the award publicly too, claiming that Chevron in the past has favored Itsekiris in an unbalanced community development program in the Niger Delta. Comment -------------- ¶10. (C/NF) It seems gratitude is hard to come by in the Delta. Chevron's present stance is a marked break from the divisive past, although it may be making virtue out of a reality that resuming production in the face of a clear and as of yet unchecked insurgent threat is cost prohibitive. Shell, which has enjoyed a better relationship with some communities among the Ijaw, is nevertheless assuming unprecedented political risks in returning to the swamp at this time. The multiple missions of military personnel assigned to Shell sites could well result in Shell being tied to a major human rights incident if the military attempts to assert its control over communities dominated by militants, ironically Ijaws. The latest Shell strategy seems surprising in light of the relative improvement in Shell's corporate and social responsibility profile over recent years. Shell officials on the ground seem aware and accepting of the balance between gains and risks, especially the risk of renewed fighting; as one Shell official characterized it in a recent discussion with the CRO: "we want to keep civilian losses to a minimum." MEECE