U.S. COMPANY FIRES 1,200 NIGERIANS, PREPARES TO

C O N F I D E N T I A L SECTION 01 OF 02 LAGOS 001276 SIPDIS SIPDIS DOL FOR SUDHA HALEY STATE FOR DRL GABRIELLA RIGG E.O. 12958: DECL: 10/12/2016 TAGS: ELAB PGOV PREL NI SUBJECT: U.S. COMPANY FIRES 1,200 NIGERIANS, PREPARES TO AVOID UNREST Classified By: Consul General Brian L. Browne; Reasons 1.4 (D, E) ¶1. (C) SUMMARY. U.S. oil and gas service contractor Willbros International will lay off 1,200 employees at its largest Niger Delta site. Insecurity in the Niger Delta has caused oil companies to shut down operations in the area. As a consequence, Willbros' work, which is all derivative of the oil majors, and the company's income have dwindled almost to zero. These layoffs are further complicated because Willbros recently repudiated a contract with oil worker union NUPENG; the company says the employee who negotiated the onerous contract was not authorized to execute this financially ruinous deal. Willbros fears the layoffs, scheduled to take place in mid to late October, will trigger violence and is taking precautionary measures. On October 1, oil sector contractor Baker Hughes announced the sale of its Oni facility to the Nigerian company Jemmtek. The sale made 68 Nigerian employees redundant; however, in this instance, Baker Hughes' fears of a backlash were unfounded. Instead, press reviews of the sale were positive, focusing on Jemmtek's assumption of warehouse and other services, effectively ensuring "local content". END SUMMARY. With Oil Shut-In and Income Down, Company Reduces Staff -------------- -------------- ¶2. (C) U.S. oil and gas service contractor Willbros International's Vice President Rick Wiggins and corporate counsel Jeff Faludi told us on September 26 the company will lay off 1,200 Nigerian employees at its Rivers State Choba site I facility. Continued insecurity in the Delta has suppressed the oil majors' production levels and the decreased activity has reduced Willbros' service contract revenue significantly. The company can no longer afford the 1,200 idle workers on its payroll, the executives said. ¶3. (C) The National Union of Petroleum and Natural Gas Workers (NUPENG),which Willbros notified on September 14 of the decision, opposes the action. The company is offering workers the severance package called for in the workers' 2004-2006 collective bargaining agreement with NUPENG, plus a 20 percent incentive. Many workers, while not happy about the redundancies, were willing to accept the severance package, according to Willbros. However, NUPENG, wanting to hew the hard-line, trying to block workers from learning about the package, roughed up couriers delivering information to the employees. Contract Invalidity Complicates Layoffs -------------- ¶4. (C) The layoffs are complicated by the fact that Willbros repudiated a contract negotiated with NUPENG in May. Company executives said the employee who negotiated the contract had acted outside the scope of his authority and failed to obtain the company's permission to sign the contract. The contract was ruinously expensive, the executives claimed, providing for steep salary increases as well as a 1,100 percent increase in benefits for terminated employees. ¶5. (C) The company has attempted to renegotiate the contract, but NUPENG contends the new contract is sacrosanct. Mediation by the Federal Ministry of Labour and Productivity and meetings with Rivers State Governor Odili have been unsuccessful resolving the situation. The company anticipates that either the union or the company will take the case to the Industrial Labour Court for legal resolution. Company Fears Violence To Persons, Property -------------- ¶6. (C) The Choba ethnic community that inhabits the area around the site will suffer not only the loss of jobs but also the myriad local small businesses that have grown up to service the site will be hit hard by the drawdown. Hundreds of vendors make their livings by selling near the site, and support additional thousands of family members and other LAGOS 00001276 002 OF 002 dependants through their work, the executives said. Willbros fears the Choba community will react violently to the layoffs, and is taking precautions to avoid danger to the few workers and to the equipment that will remain at the site. The company's Choba II site is located across the river from the Choba I compound near the village of the Izyodu ethnic group. This group has a longstanding conflict with the Choba and is considered by the company to be "more volatile" than the Choba. As a result, the company fears that if Choba members were to attempt to attack the company's Choba II compound, inter-ethnic conflict could ensue. Congenoffs Urge Registration of Americans -------------- ¶7. (C) Company executives said they would assure registration with the Consulate's American Citizen Services Section American employees currently in country. They also want to have a public relations firm to mitigate negative press accounts that may result from the lay-off. The executives also stressed that the move is necessitated by lowered revenue due to the security situation in the Delta, nonetheless the move does not signal that the company is completely pulling out of Nigeria. Present plans call for work to continue at the company's Choba II facility, an open shop, that supports offshore services. Baker Hughes "Local Content" Transfer Finesses Layoffs -------------- -------------- ¶8. (C) Baker Hughes Nigeria Country Manager Phil Vogel told Pol/Econ Officer that 68 Nigerian employees were released in October when the company sold its Oni facility to the Nigerian firm Jemmtek. The company notified the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and NUPENG of this decision on September 28. Vogel said the workers' severance package included three months pay in lieu of advance notice. Despite these precautions, Vogel feared a violent backlash and removed all expatriates from the area. The backlash did not occur, and press reviews of the sale were positive. The stories focused on the fact that Jemmtek, a Nigerian company, would be providing Baker Hughes with warehouse and other services, effectively ensuring increased "local content". ¶9. (SBU) Comment: Neither of these oil service companies is "pulling out" of the Delta because of security concerns. Willbros' situation illustrates the domino effect shut-in oil production has on the ability of oil services companies to continue to do their work which, in turn, provides additional jobs and income for some of the people in the riverine communities adjacent to the contractors' work sites. End Comment. BROWNE