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Risk and resilience in the Nigerian oil sector: The economic effects of pipeline sabotage and theft

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  • Yeeles, Adam
  • Akporiaye, Alero

Abstract

Political unrest in the Niger Delta has long been viewed as a hurdle for extracting maximum value from Nigeria's oil resources. Recently, investors and policymakers have laid blame for sector under-performance on pipeline sabotage and theft, and sounded the alarm for an impending ‘oil crisis’. However, our understanding of the economic effects of social action against oil companies is incomplete. Rigorous analysis has not heretofore been offered as evidence for such dire futures. Despite the obvious risk of pipeline interdiction, price dynamics and aggregate production respond minimally to pipeline interdiction. Based on quantitative analysis of the relationship among price, production and pipeline interdiction from multiple data sources covering different time intervals (monthly data from 2005 to 2014 and annual data from 1999 to 2013), we find no evidence of significant effects of pipeline interdiction on production and a weak relationship between pipeline interdiction and Bonny light crude prices. Reported losses in product are substantial, but there is no evidence of statistically significant impacts on price or production in the aggregate. Explanations for this counterintuitive result are cast in terms of sector resilience. The implications of this finding for producer risk and the likelihood of an impending ‘oil crisis’ are discussed.

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  • Yeeles, Adam & Akporiaye, Alero, 2016. "Risk and resilience in the Nigerian oil sector: The economic effects of pipeline sabotage and theft," Energy Policy, Elsevier, vol. 88(C), pages 187-196.
    • Handle: RePEc:eee:enepol:v:88:y:2016:i:c:p:187-196
    DOI: 10.1016/j.enpol.2015.10.018
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    3. Xiaoyong Xiao & Jing Huang, 2018. "Dynamic Connectedness of International Crude Oil Prices: The Diebold–Yilmaz Approach," Sustainability, MDPI, vol. 10(9), pages 1-16, September.
    4. Asongu, Simplice & Nnanna, Joseph & Biekpe, Nicholas & Acha-Anyi, Paul, 2018. "Contemporary Drivers of Global Tourism: Evidence from Terrorism and Peace Factors," MPRA Paper 91996, University Library of Munich, Germany.
    5. Raghoo, Pravesh & Surroop, Dinesh & Wolf, Franziska & Leal Filho, Walter & Jeetah, Pratima & Delakowitz, Bernd, 2018. "Dimensions of energy security in Small Island Developing States," Utilities Policy, Elsevier, vol. 53(C), pages 94-101.
    6. Mesagan, Ekundayo & Unah, Aboje & Idowu, Olamide & Alamu, Abidemi, 2019. "Oil Resource Abundance in Nigeria and Iran: Contrapuntal Effect on Social and Economic Welfare," BizEcons Quarterly, Strides Educational Foundation, vol. 4, pages 3-22.
    7. Niyati Bhanja & Samia Nasreen & Arif Billah Dar & Aviral Kumar Tiwari, 2022. "Connectedness in International Crude Oil Markets," Computational Economics, Springer;Society for Computational Economics, vol. 59(1), pages 227-262, January.

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