Nigerians protest in Lagos over the government's removal of a fuel subsidy. Photograph: Sunday Alamba/Associated Press
A major union representing Nigerian oil workers has said it will shut down all production on Sunday as part of a nationwide strike paralysing the country, which is vital to US oil supplies.
It is unclear how large an effect the planned shutdown by the Petroleum and Natural Gas Senior Staff Association of Nigeria (Pengassan) will have. However, oil prices rose on Thursday over concerns about global supplies, meaning even the threat could be enough to push prices higher.
The strike began on Monday after the government reversed a two-decade-long subsidy programme that had kept gas prices low for consumers. Anger over the government's decision has triggered demonstrations, and related violence has left at least 12 people dead.
Pengassan said if the government did not restore the subsidies, the union would be "forced to go ahead and apply the bitter option of ordering the systematic shutting down of oil and gas production".
Benchmark oil prices rose by $1.03 to $101.90 per barrel on Thursday in electronic trading on the New York Mercantile Exchange. Prices rose over concerns about global supplies.
Nigeria is the fifth largest oil exporter to the US. Losing those supplies would force American refineries to replace 630,000 barrels of crude per day.
The impact of the Nigerian government's subsidy removal has been dramatic: gas prices in Nigeria more than doubled overnight, causing transportation and food costs to rise in a country where most people live on less than $2 a day.
Despite the problems oil, extracted mostly offshore by foreign firms or automated onshore systems, keeps flowing to other countries. Now unions are threatening to disrupt those operations.
Even if production is slowed, oil in inventories could continue to supply foreign markets for a time. Barclays Capital said: "A complete shutdown, if carried out, is likely to have a rather large detrimental effect on Nigerian output, even though exports could continue from their inventories in the short term."
Nigeria produces about 2.4m barrels a day from the swamps of its southern delta to massive offshore oil fields. Oil accounts for up to 80% of revenues in a country of more than 160 million people.
The president, Goodluck Jonathan, said removing the subsidy was necessary to save the country an estimated $8bn a year – money which he promises will finance essential road and public projects. However, protesters distrust the government and say it should first cut corruption.
The strike has closed Lagos's busy Apapa port, cutting off cargo shipments, and air carriers have cancelled international flights. Businesses that defy the strike and stay open risk being ransacked by labour activists who have warned anything they find inside will be redistributed.
The oil industry has remained largely removed from typical business in the country. Many of its operations are automated, both for efficiency and to avoid staff working in the Niger Delta's maze of creeks, where criminal gangs and militants kidnap workers for ransoms. Foreign companies also run large offshore fields, far from the streets and chaos of growing demonstrations across the country.
Most oil firms, including the dominant Royal Dutch Shell, say they are monitoring the situation. Other companies with subsidiaries working in Nigeria include Chevron, Exxon Mobil, Italy's Eni and French firm Total, which operate in tandem with the state-run Nigerian National Petroleum.
Levi Ajuonoma, an NNP spokesman, said the company had not adjusted its production and shipping forecasts over the strike.
It is unclear how large an effect the planned shutdown by the Petroleum and Natural Gas Senior Staff Association of Nigeria (Pengassan) will have. However, oil prices rose on Thursday over concerns about global supplies, meaning even the threat could be enough to push prices higher.
The strike began on Monday after the government reversed a two-decade-long subsidy programme that had kept gas prices low for consumers. Anger over the government's decision has triggered demonstrations, and related violence has left at least 12 people dead.
Pengassan said if the government did not restore the subsidies, the union would be "forced to go ahead and apply the bitter option of ordering the systematic shutting down of oil and gas production".
Benchmark oil prices rose by $1.03 to $101.90 per barrel on Thursday in electronic trading on the New York Mercantile Exchange. Prices rose over concerns about global supplies.
Nigeria is the fifth largest oil exporter to the US. Losing those supplies would force American refineries to replace 630,000 barrels of crude per day.
The impact of the Nigerian government's subsidy removal has been dramatic: gas prices in Nigeria more than doubled overnight, causing transportation and food costs to rise in a country where most people live on less than $2 a day.
Despite the problems oil, extracted mostly offshore by foreign firms or automated onshore systems, keeps flowing to other countries. Now unions are threatening to disrupt those operations.
Even if production is slowed, oil in inventories could continue to supply foreign markets for a time. Barclays Capital said: "A complete shutdown, if carried out, is likely to have a rather large detrimental effect on Nigerian output, even though exports could continue from their inventories in the short term."
Nigeria produces about 2.4m barrels a day from the swamps of its southern delta to massive offshore oil fields. Oil accounts for up to 80% of revenues in a country of more than 160 million people.
The president, Goodluck Jonathan, said removing the subsidy was necessary to save the country an estimated $8bn a year – money which he promises will finance essential road and public projects. However, protesters distrust the government and say it should first cut corruption.
The strike has closed Lagos's busy Apapa port, cutting off cargo shipments, and air carriers have cancelled international flights. Businesses that defy the strike and stay open risk being ransacked by labour activists who have warned anything they find inside will be redistributed.
The oil industry has remained largely removed from typical business in the country. Many of its operations are automated, both for efficiency and to avoid staff working in the Niger Delta's maze of creeks, where criminal gangs and militants kidnap workers for ransoms. Foreign companies also run large offshore fields, far from the streets and chaos of growing demonstrations across the country.
Most oil firms, including the dominant Royal Dutch Shell, say they are monitoring the situation. Other companies with subsidiaries working in Nigeria include Chevron, Exxon Mobil, Italy's Eni and French firm Total, which operate in tandem with the state-run Nigerian National Petroleum.
Levi Ajuonoma, an NNP spokesman, said the company had not adjusted its production and shipping forecasts over the strike.
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