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COLLOQUIUM ON EXPLORATION & OIL THEFT Paul Michael Wihbey President, GWEST LLC Washington DC

COLLOQUIUM ON EXPLORATION & OIL THEFT Paul Michael Wihbey President, GWEST LLC Washington DC September 24, 2013 O. B. Lulu Briggs Petroleum Roundtable Hotel Presidential, Port Harcourt. FOCUS AREAS. Bunkering: Economic Insurgency Resolution and Perception

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COLLOQUIUM ON EXPLORATION & OIL THEFT Paul Michael Wihbey President, GWEST LLC Washington DC

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  1. COLLOQUIUM ON EXPLORATION & OIL THEFT • Paul Michael Wihbey President, GWEST LLC Washington DC • September 24, 2013 • O. B. Lulu Briggs Petroleum Roundtable • Hotel Presidential, Port Harcourt.

  2. FOCUS AREAS • Bunkering: Economic Insurgency • Resolution and Perception 3. Forecast 2014-15: Linear + Non-Linear - Window of Vulnerability or Opportunity.

  3. BUNKERING: ECONOMIC INSURGENCY • HISTORICAL ANALOGY: Columbia/Pablo Escobar Criteria • Resource – based • Foreign demand • Popular support • Diffused production • Massive Revenue: Corruption • Cost Efficiencies/Organisation & Central • Quasi – Sovereign: Paramilitary & Political • US Intervention

  4. 2. NIGERIA: “BLOOD OIL” • 5/7 Criteria Fulfilled • Rooted in failure of PIB/Host Community Revenue Provision, 2009-10 • Vacuum: Predatory players, Domestic & Foreign; Arms; Shipping; Fin. Market • “Free Oil” (ChatamHouse)

  5. RESOLUTION * Office of the Special to the President, Niger Delta: Conference – Lagos (August 2013) • Ribadu Report • Chatham House • Revenue watch institute • NEITI • PENGASSAN • Emerald Energy Centre, GWEST LL (NIIA)

  6. 3. TWO – FRONT WAR • Insurgencies gaining traction (perception) • Abuja cannot defeat both at the same time using Traditional Security & Military counter measures • Possible Third “shock” to be expected, unless…... GOODLUCK QUOTE “The oil sector has brought nothing to this country than shocks. Even some new shocks that we never thought could be shocks, things like oil bunkering and oil theft. These are shocks because once they happen, they shut down the entire system”. Sept 8, 2013

  7. BUNKERING CENTRES

  8. RESOLUTION • Bunkering, not a traditional insurgency; but an existential threat to the stability of country & of the state • Requires non-traditional counter-measures within a dedicated rapid reaction strategy, broad-based on’ 1. Technologies: Marking and Surveillance. 2. Adjudication 3. Host community stakeholding.

  9. Strategy is audited, w/ international validation & support is activated; such as; - Demand: End users & distribution - Interdiction - Punitive: Financial markets. UK PM Cameron: Davos BILL GATE “Nigeria needs to think…. That it is really far behind”

  10. WINDOW OF VULNERABILITY FORECAST 2014-15 LINEAR: Matrix of trendlines that are subject to manipulation for political objectives, because of high degree of probability leading to inevitabilities. 2001 – 2013 High Prices + High Production + High Revenue drivers of stability + growth: GDP/CAP

  11. 2014 – 2015: Lower prices & declining production reverses GDP; revenue flows to FG; GDP/CAP With highly likely outcomes that feed the trajectory of the insurgencies.

  12. Lower Prices: Brent - Geopolitical/KSA, IRAN ($ 85 – 95/$70 floor) - Commodity super-cycle - Increase supply - Less demand - US Monetary Policy, * IMF, CITIBank

  13. APRIL – SEPT 2013 BRENT CRUDE OIL PRICE

  14. LOWER PRODUCTION - Bunkering - Force Majeure - Reduction of exploration + expansion. - Shut-in 2013 BUDGET TARGET : 2.5MBD 2011 : 2.2 2012 : 2.1 2013 : 1.9 (July) 2014 : 1.5 – 1.7 Current targets shortfall : 600,000 B/D 2014 : 800,000 – 1MBD

  15. REVENUE LOSS • Oil revenue 70% of FG Budget • 1st quarter 2013; 17% loss of oil sales (400,000B)* • Single month loss: $1.2B • Government Gross revenue 42% decline July (N500B; $ 3B) from June (N800 B; $ 5B) • Discount sales, with loss of US market * Kingsley Kuku

  16. CALCULUS OF PROBABILITY OUTCOME • E.C.A. decline ($ 9B - $ 5B)? • Government allocation shortfall (May) • Education allocations • Security expenditures (Oil revenue N 1.3B = cost of personnel in FG 2012 budget)

  17. IMPACT PROJECTED ON: • Students • Wage earners (subsidy) • Oil sector workers (bunkering) • Subsistence (wealth gap) • Professional & middle class (loss of employment opportunities)

  18. VULNERABILITY AND OPPORTUNITY (BLACK SWAN) • As linear trends become evident: • Social mobilization • Spontaneous activation • Group conciousness • Power shift: Bottom Up • Political unexpected or social adjustments (Radical: Immediate or short term)

  19. 2013 :Egypt: - counter revolution : Turkey - domestic policy : Brazil - corruption : UK - leadership : USA - Syria war : Vatican - Resignation : Nigeria - Subsidy 2012

  20. CONCLUSION LINEAR FORECAST • Economic, political & security deterioration • Third Shock/implosion in run up to 2015 election, with serious political consequences for economic & security well being of Nigeria. NON-LINEAR FORECAST • The inevitable can be avoided • The lesson of Obama: Non-conventional policy options with committed leadership. Sieze the Option/Opportunity.

  21. APRIL – SEPT 2013 BRENT CRUDE OIL PRICE

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