Oil companies operating in Nigeria are facing an escalation in expatriate salaries and security costs following the death of a Dutch oil worker during an attack by armed gunmen on Tuesday.

The worker from Hyundai, the South Korean industrial group which has a Nigerian oil service unit, was shot dead late on Tuesday in an attack on a vessel transporting Nigerian and Korean workers near a major oil and gas export terminal in the oil producing but turbulent Niger Delta region. At least one Nigerian was also killed.

The killing, which security sources say was either an armed robbery attempt by pirates, or a revenge attack by fighters loyal to a delta militia leader who has recently been jailed by Nigerian authorities, was the second expatriate death in the last three months. In November, a British oil worker taken hostage by militants was killed when a navy patrol came across his captors and a gunfight ensued.

Industry analysts said they expected expatriate workers, many of whom consider an assignment in the Niger Delta as one of the world’s most dangerous locations, to make greater and more costly demands on their companies. Expatriates could ask for more expensive helicopter transit and greater paid protection by Nigerian security services when working in the delta’s waterways.

“This incident alone is not enough to force drastic measures, as the oil industry has been dealing with this kind of threat for some time, but it does keep up the momentum of security pressures,” says one industry security source.

Oil service companies, which do the bulk of engineering and drilling work for multinational oil companies, are already smarting from higher costs relating to insurance or setting up more comprehensive security arrangements. Militant activity has spiked since the start of last year, when attacks forced Nigeria to shut in a quarter of its total production.

Oil analysts say increasing security burdens for oil service companies are weighing down project completion times. Some oil service company executives say they imagine a shift towards more safe offshore projects, but which ultimately produce more expensive oil for international markets because of larger developmental costs.

The delta is widely expected to see a surge in violence and militancy in the run up to national elections in April, when armed groups, many of whom were created by politicians before elections in 2003, are likely to vie for power and influence on behalf of politicians, communities and themselves.

On Tuesday oil companies evacuated staff from three oilfields in the eastern delta, after a local community dispute between groups vying for control of compensation offered by oil companies resulted in the death of 12 community members. Oil production was not immediately affected.

The killing of the Dutch man has not prompted more evacuations anywhere else, though industry security sources said companies would be watching the situation closely and could react if militants take more expatriate hostages. Oil companies have already withdrawn hundreds of workers after last year’s attacks and have removed dependents of foreign oil workers out of the delta.

Dozens of expatriates have been kidnapped over the last year by armed groups seeking ransom payments, extorting oil companies and claiming to be fighting for greater autonomy. Foreign oil workers are rarely killed in the delta.

Sources in Nigeria’s navy said the navy was planning operations to track down the perpetrators of Tuesday’s killings. Nigeria’s military, itself hobbled by corruption and a lack of training and equipment, has struggled to hold down militant activity in the delta’s vast waterways.

Copyright The Financial Times Limited 2018. All rights reserved.

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