VZCZCXRO1249
PP RUEHMA RUEHPA
DE RUEHUJA #1096/01 1681300
ZNR UUUUU ZZH
P 171300Z JUN 09
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 6335
INFO RUEHOS/AMCONSUL LAGOS 1522
RUEHJO/AMCONSUL JOHANNESBURG 0060
RUEHGB/AMEMBASSY BAGHDAD 0385
RUEHZK/ECOWAS COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 03 ABUJA 001096 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR OES/EGC FOR MOORE AND FOR EEB/ESC/IEC/ENR HENRY 
DEPT PASS TO USAID AFR/SD FOR CURTIS, ATWOOD, AND SCHLAGENHAUF 
DEPT PASS TO USTR-AGAMA, USTDA-MARIN AND EXIM-RICHTER 
JOHANNESBURG FOR NAGY 
BAGHDAD FOR MCCULOUGH 
DEPT OF ENERGY FOR PERSON 
TREASURY FOR PETERS AND IERONIMO 
DOC FOR 3317/ITA/OA/BURRESS, 3130/USFC/OIO/ANESA/HARRIS 
 
E.O. 12958: N/A 
TAGS: EPET ENRG ECON SENV EIND EINV TRGY TPHY NI
SUBJECT: NIGERIA: DAS HENGEL DISCUSSES NIGER DELTA DEVELOPMENT WITH 
NNPC MANAGERS 
 
ABUJA 00001096  001.2 OF 003 
 
 
SENSITIVE BUT UNCLASSIFIED; BUSINESS PROPRIETARY INFORMATION; NOT 
FOR DISSEMINATION OUTSIDE USG 
 
¶1. (SBU) SUMMARY:  The challenges of economic development in the 
Niger Delta was the subject of a meeting on May 21 for EEB DAS 
Douglas Hengel with Group General Manager for Strategy, Nigerian 
National Petroleum Corporation (NNPC), Dr. Timothy Okon, and NNPC 
Manager of the Nigerian Content Division George Osahon.  The 
discussion centered on the six southern Delta states, referred to 
simply as the south-south region, i.e. Bayelsa, Rivers, Akwa Ibom, 
Cross River, Edo, and Delta States.  The region is a low-lying land 
of innumerable creeks, waterways and mangrove swamps which stretch 
for over three hundred miles and is blessed with a variety of 
natural resources including abundant low sulfur oil and natural gas. 
Okon reported that between 1999 and 2008 governments of the southern 
states of Nigeria received about $25 billion from crude oil 
revenues.  However, the region continues to have a severe lack of 
basic social and economic infrastructure and widespread poverty and 
unemployment that contribute to the frustration currently being 
expressed through militancy and criminality.  Okon suggested that 
converting the rents derived from mineral resources to human capital 
such as engineering, fabrication, logistics and training is the only 
strategy that will lead to the creation of sustainable regional 
wealth and reduce poverty.  Okon promoted a cluster approach to 
development of the state and local communities.  Osahon underscored 
how the lack of infrastructure stymies plans to kick start local 
economies.  Osahon further lamented that the Delta is very difficult 
terrain which results in poor accessibility by way of transportation 
and that basic infrastructure development within the region costs as 
much as ten times more than in other parts of Nigeria.  The two NNPC 
managers disagreed on whether government should provide higher 
levels of funding.  End Summary. 
 
PROBLEMS KNOWN, THE REAL QUESTION IS HOW TO MOVE FORWARD 
--------------------------------------------- ---------- 
¶2. (SBU) Deputy Assistant Secretary Douglas Hengel led a delegation 
from Washington to attend a Nigeria - U.S. Energy and Climate 
Roundtable.  To maximize the delegation's opportunities for open 
dialogue, DCM hosted meetings on the margins of the Roundtable.  Dr. 
Timothy Okon, Group General Manager for Strategy, Nigerian National 
Petroleum Corporation (NNPC) and former ExxonMobil Exploration 
Company manager, attended a meeting with DAS Hengel and the 
delegation, accompanied by George Osahon, NNPC Group General Manager 
for the Nigerian Content Division, to discuss economic challenges in 
the Niger Delta.  Okon described three issues negatively affecting 
the Niger Delta's economic prospects: alienation, lack of 
development, and militancy/criminality.  He noted that the region's 
problems were well diagnosed, and the more important question was 
how to go forward.  Engaging civil society, and promoting education 
and business development, he noted, are key, but lamented that 
nothing will happen without state and local government 
accountability. 
¶3.  (SBU) DAS Hengel asked Okon how he saw a successful development 
strategy.  Okon explained that working with civil society is 
essential and should center on basic and vocational education, 
skills transfer, and business development.  This strategy would 
provide Delta residents the ability to participate in local 
development projects, such as harnessing stranded/flared gas to 
provide power to local commercial ventures which could sustain local 
economies and initiate a model which could be replicated throughout 
the Delta region.  Such projects could play an important role in 
resolving the region's security dilemma. 
SEQUENCING IMPORTANT AS WELL 
---------------------------- 
¶4. (SBU) Osahon noted that sequencing of any proposed projects, as 
described by Okon, is important.  Aside from the development of 
commercial zones, or "clusters" as referred to by some, there is an 
even more pressing need for basic infrastructure to provide clean 
water, electricity and roads.  Once this infrastructure was in 
place, development would come, he argued.  Environmental remediation 
must also be part of any development program.  Osahon said that this 
would require billions of dollars.  Osahon complained about the need 
to engage with militants and get them behind any attempt at 
infrastructure or development programs.  He added that a positive 
gesture from the federal government is crucial and argued that the 
 
ABUJA 00001096  002.2 OF 003 
 
 
government should provide additional funding for the region.  Osahon 
lamented that the Delta is very difficult terrain which results in 
poor accessibility by way of transportation and that basic 
infrastructure development within the region costs as much as ten 
times more than in other parts of Nigeria. Okon disagreed with 
Osahon that development would come with centrally driven projects 
and additional funding; he restated that without participation from 
state and local authorities, development efforts would fail.  Okon 
offered an example of two potable water projects, one successful now 
for twenty years and another which never broke ground because the 
local state authorities did not participate in the project.  He 
further stated that when a hospital has been built it rots, because 
there is no money to operate the facility or sustain it everyone 
literally waits for someone to make it work.  He recommended that 
oil companies offer to match funds with the state and local 
governments to build a hospital for the community but also provide 
supplies and pay the salaries of doctors and nurses to serve the 
local community. 
ROLE FOR IOCS AND OTHER DEVELOPERS 
---------------------------------- 
 
¶5.  (SBU) Osahon felt strongly that local communities should benefit 
from small local projects tied to oil/gas exploration.  For example, 
he noted wells drilled for exploration might later be fitted with 
filters to provide potable water rather than simply left in an 
unusable and potentially dangerous state.  Osahon also explained 
that the international oil and gas companies do not always work well 
with the local and state governments to coordinate community 
investments. 
 
ACCOUNTABILITY IS THE ISSUE, NOT MONEY 
-------------------------------------- 
 
¶6. (SBU) Okon noted the importance of realistic planning to ensure 
that project funding is maintained.  Budgeting is straightforward 
because state-level revenues are tied to oil prices, but too often 
little productive is done with the money.  Between 1996 and 2008 at 
least $25 billion was given to the six states of the region, but 
there is little to show for it.  Okon felt strongly that an 
intergenerational model needs to be implemented to ensure 
incremental resource increases are channeled to the projects for 
which they were intended.  Also, coordination with the Niger Delta 
Development Commission (NDDC), a GON agency, would be required and 
he was not sure how such plans fit with NDDC's ideas.  Ultimately, 
all efforts would need to be linked to a Delta Master Plan.  Both 
interlocutors noted that political will and follow-up are key to the 
success of any projects.  Even with resources, nothing will happen 
without improvements in regional leadership.  The problem is not 
simply resources, but includes accountability at the state and local 
level. 
 
COMMENT 
------- 
 
¶7. (SBU) It is a paradox that a region that bears so much natural 
wealth remains largely impoverished despite decades of oil 
exploration.  It is clear that there needs to be political will from 
the GON and state and local governments and the affected communities 
as well as a consensus and buy-in from all to take action.  Small 
steps and small successes can build sustainable communities.  Today 
the deeply embedded distrust of the oil companies and the gross 
neglect and deprivation by the government, at all levels, over the 
years are significant barriers.  A responsive central government 
would ordinarily give special developmental status and attention to 
such region as is done elsewhere in the world.  The profitability of 
illegal bunkering and the criminality that support it continue 
instead.  Frustrations, ethnic polarization and communal suspicion 
provide good reasons for genuine agitation for change.  Currently 
the GON has its military moving through the Delta region clearing 
camps associated with bunkering and attacks on the international oil 
companies.  Nonetheless, criminality has become a way of life for 
young men and women because without education and industry for job 
creation, a life of crime is the only way many see for going 
forward.  Nonetheless, a "cluster approach", with communities taking 
ownership of new infrastructure and ground-up efforts, may have 
 
ABUJA 00001096  003.2 OF 003 
 
 
potential to reclaim the Delta bit by bit. 
 
¶8. (U) This cable was coordinated with Consulate Lagos and cleared 
by State/EEB. 
 
SANDERS