THREATENED STRIKE STILL ON: IMPACT ON PRODUCTION

C O N F I D E N T I A L SECTION 01 OF 02 LAGOS 001182 SIPDIS SIPDIS DOE FOR GPERSON AND CGAY TREASURY FOR DPETERS DOC FOR PHUPER STATE PASS TRANSPORTATION FOR MARAD STATE PASS USTR FOR ASST USTR SLISER E.O. 12958: DECL: 09/11/2016 TAGS: EPET PGOV ELAB NI SUBJECT: THREATENED STRIKE STILL ON: IMPACT ON PRODUCTION AND EXPORTS STILL UNCLEAR Classified By: Consul General Brian L. Browne; Reasons 1.4 (D, E) ¶1. (C) Summary: Nigeria's two oil sector unions continue to assert their determination to strike on September 13. The strike was ostensibly called to focus attention on deteriorating security conditions in the Niger Delta. Dr. Ayo Balogun, Secretary to the Minister of Petroleum Resources, said negotiations were being conducted to avert the strike, but he was unsure whether the negotiation would succeed. Unions have historically refrained from damaging production facilities. In the face of the current impasse between the government and union, the oil majors are talking to their in-house unions to institute measures that will maintain production levels after the midnight September 12 strike deadline. Although the prospect for some type of labor action appears increasingly likely, as the clock ticks toward September 13, the scope of that action and whether it affects oil production remains uncertain. End Summary. Unions Firm in Decision to Strike,Begin Mobilization - ¶2. (SBU) Meeting with Econoffs on September 11, Mr. Ababakar, Chairman of the Petroleum Industry and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) Lagos Zone, said PENGASSAN and the National Union of Petroleum and Natural Gas Worker (NUPENG) remained firm in their decision to begin a three day strike on September 13. PENGASSAN,s zonal chairmen had begun mobilizing the union's members for the strike. PENGASSAN and NUPENG had a combined national membership of approximately 25,000 oil production and refinery workers as well as gasoline delivery truck drivers and station attendants. ¶3. (SBU) The Government's response to the unions had been inadequate. In a communiqu the unions demanded the government to provide a safe working environment in the Niger Delta in response to the accidental shooting of a PENGASSAN member on August 21. In response, the Ministry of Labour invited the unions to a September 7 meeting to discuss the communiqu; however, the government's letter to the unions was delivered the same day as the meeting. Because of the abbreviated notice, neither NUPENG nor PENGASSAN National Executive Council members attended, although lower-level PENGASSAN representatives were present. On September 8, the Nigerian National Petroleum Corporation also met union representatives to explain its efforts to spur economic development in the Niger Delta. NEC members met Monday with the Labour Ministry. Petroleum Ministry: Strike Will Not Affect Production, Exports - ¶4. (SBU) Dr. Ayo Balogun, Executive Secretary to the Minister of Petroleum Resources, told Econoff September 11 that government interventions at the highest level were being made to avert the strike. Dr. Balogun, however, demurred in discussing details of the negotiations. The unions had historically exercised restraint during strikes, and had never damaged production or export facilities. As professionals in the oil industry, union members understood the serious implications of any actions that would affect production or exports. In the past four or five years, union actions had affected only downstream operations such as refineries and gasoline distribution and delivery systems. (Comment: Should the oil truckers honor the strike, fuel scarcity will be quickly felt in most of Nigeria. End Comment) Majors: Impact on Production Cannot Be Predicted - ¶5. (C) Senior executives of the oil majors told Econoffs LAGOS 00001182 002 OF 002 that whether the strike would actually hold would not be known until just before the strike deadline. The government had a history of last minute overturns or partial concessions that served to douse union demands and to avert strikes, according to Chevron executives. Even if the strike should occur, the impact on oil production was not clear, and would depend on the precise strike actions the unions take, Chevron representatives said. Most majors were actively engaged in discussions with their in house union representatives to influence what actions union members took in the course of the strike. Employees understood the implications for their own employment situation of a shutdown of production, according to Chevron executives. One Chevron manager believed the strike was likely to happen. ¶6. (C) Chevron executives explained the actions union members take might vary according to the company and these could have different impacts on production. Companies that had maintained good union relationships were less likely to be shut down, they believe. Moreover, the impact of a production shutdown on exports would vary according to what part of the production (on-shore, off-shore or deep water offshore) was affected. ¶7. (C) Shell executives told Econoffs that the company plans to "push back" against the strike. Shell would encourage workers to remain on the job, reminding them that they would not be paid if they honored the strike and didn't work. Shell believed this tack had been successful in the past. If workers did participate in the strike, Shell executives said, the impact on oil production would depend on how active a role union members played. If the workers merely failed to report to work or simply walked off the job, the company could maintain skeleton crews sufficient to monitor the equipment, to assure safety, and maintain production. If striking workers began to turn off or shut down machinery, then the potential for a diminution of production became higher. ¶8. (C) Comment: On the eve of the threatened strike, oil industry representatives do not know for certain whether the unions will strike. If the past is any guide, the unions and the government will be involved in late night negotiations in an attempt to avert the strike. This may work as it has before. However, taking out an informal insurance policy the major oil companies are working hard behind the scenes with union representatives to head off any action that would curtail production or exports. BROWNE