CHEVRON NIGERIA SEEKS LONG-TERM SOLUTION TO DELTA

C O N F I D E N T I A L SECTION 01 OF 03 LAGOS 000478

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E.O. 12958: DECL: 03/22/2016
TAGS: EPET ENERG ASEC EAID NI
SUBJECT: CHEVRON NIGERIA SEEKS LONG-TERM SOLUTION TO DELTA
UNREST


Classified By: Ambassador John Campbell for reasons 1.4 (d) and (e).

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Summary
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1. (C) Chevron Nigeria security consultant Hamish MacDonald
shared concerns that a large amount of money was paid for the
release of the Delta hostages and an industry of
hostage-taking may be in the offing. Chevron has managed
thus far to stay out of harm's way, but MacDonald feels the
urgent need to expand internationally-supported, long-term
development programs. He plans to discuss the matter
privately with Delta State Governor Ibori. Chevron will be
welcoming a new Managing Director, and, with his arrival,
MacDonald expects Chevron to transition from an expansion
mode to one of consolidation. End Summary.

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Chevron Worries about Deal Struck to Release Hostages
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2. (C) At a March 29 meeting with the Ambassador, Chevron
security consultant Hamish MacDonald said Chevron was
"blindsided" by the commitments made to effect the March 26
release of three hostages held by the Movement for the
Emancipation of the Niger Delta (MEND). He said company
sources indicated "a very large amount" of money had changed
hands for this release, far more than in the release of
hostages in January, and if true, we might be witnessing the
birth of an industry. The Ambassador replied that the USG
commitment remained strictly a willingness, at the invitation
of the GON, to observe a newly created development commission
that might include members of the aggrieved communities which
harbor the hostage takers.


3. (C) MacDonald compared MEND to the IRA, noting its small
size relative to its demonstrated ability seriously to
disrupt oil operations, as well as its facility for
manipulating the media. He felt MEND was targeting companies
with poor community relations and business practices and, as
such, Chevron still enjoyed an uneasy immunity from attacks.
Polcouns observed that both Willbros and Tidex had bad
reputations among communities. MacDonald observed that
Chevron was consequently rethinking its relationships with
various contractors. He admitted that the oil companies did
not have a uniform approach to the largest service companies
which they all must use.


4. (C) MacDonald did not believe the military yet had the
capacity to launch an effective retaliation against the Delta
militants, and, he said, control over security forces was
fragmented. He said since his arrival in Nigeria in 2003
there had been only very small increases in the military's
operational capacity. He felt National Security Advisor Aliyu
Mohammed had his own agenda as well as a large measure of
control over security forces. At the same time, MacDonald
cherished his relationship with Chief of Army Staff Gen.
Agwai, who is close to the President and commonly believed to
have a good handle on the issues behind Delta region unrest.
He said Chevron currently employs Agwai's daughter through
their youth employment program.

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Production Impact Not Yet Critical
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5. (C) MacDonald said that of the country's 25-30% loss of
total oil production, at least 15% could be restored within a
couple weeks if the environment were secure. Chevron has so
far only suffered one pipeline vandalism at Makaraba,
affecting 13,000 barrels per day of production and relatively
quick to fix. At the same time, he said, Chevron is still
eyeing for the future a more complete resumption of its
on-shore production, bringing up to 80,000 bpd back on-line.


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New Managing Director is a Consolidator not an Expander
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6. (C) MacDonald announced Fred Nelson would replace Jay
Pryor as Managing Director of Chevron Nigeria by mid-May this
year and that there would be a two-week overlap. Nelson was
in Nigeria 8 years ago and so has some familiarity with the
region. MacDonald called Nelson a "consolidator," while
Pryor had been concerned with growth and expansion. He
expected Chevron to augment its relationship with the Federal
Government in Abuja by increasing its office size there. As
opposed to Shell, Chevron had traditionally maintained a very
small presence in Abuja, with the effect of distancing itself
from the purely political decision-makers. The Ambassador
offered to invite Nelson for a country team briefing on his
arrival in country, and MacDonald responded enthusiastically.

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Lack of State and Federal Capacity Hinder Plans
for Long-Term Development
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7. (C) MacDonald stressed the importance of the Rivers
State development model, spearheaded and partially financed
by the State Governor and the Niger Delta Development
Commission but with capacity-building support from the USG,
HMG and the World Bank. He said state governments, while
they did not lack funds for development, did not have the
capacity to sustain development programs and would therefore
need assistance. He agreed, though, the impetus for these
programs had to come from the state governors and indicated
Chevron would privately approach Delta State Governor James
Ibori to initiate a similar program in his state. MacDonald
stressed the private nature of the meeting, intimating
Ibori's reputation with the militants made any direct
relationship with Chevron a difficult proposition. (Comment:
In comments to the press during the last hostage crisis, the
Presidency likewise stated the Rivers State model, while
good, is not enough and must be expanded to other states in
the Delta region. End Comment.)


8. (C) MacDonald felt oil companies were being slow to
develop a consensus among themselves as to how to respond to
the current Delta crisis, and there is a reluctance to
formulate a unified solution. The Ambassador noted the
potential for the current series of meetings in Washington
and London to play a role in such necessary coalition
building.

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MacDonald Believes MEND has Impetus from Abuja
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9. (C) MacDonald insinuated Delta unrest had impetus from
Abuja, observing that Vice President Atiku had lately
appeared more relaxed and free to maneuver. He noted the
convenient timing both of the hostage release and the
re-capture of Charles Taylor in conjunction President
Obasanjo's visit to Washington. He felt Obasanjo was seeking
a closer relationship with former head-of-state and notorious
political fixer Ibrahim Babangida (IBB). His sources told
him Obasanjo spoke with IBB on the phone for over an hour on
March 26 and that IBB's recent press interview, while
bordering on announcing his candidacy for the presidency and
opposition to a third term, left his options open.

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Comment
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10. (C) While upper-level management of the oil majors
continues publicly to share the GON's view of MEND and Delta
unrest as essentially criminal rather than political in
nature, MacDonald's view is different. Instead, his
proposed solutions include the immediate expansion of the

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Rivers State development initiative, added pressure on Delta
region governors, beginning with Ibori, to follow suit, and
improved cooperation and the building of a united front among
the oil companies, and reflect his view that the issues are
essentially political. End Comment.


11. (U) This cable was cleared by Embassy Abuja.
BROWNE