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The Guardian: Nigeria attacks may rise but oil firms stay put

Reuters
Monday February 18 2008
By Randy Fabi

ABUJA, Feb 18 (Reuters) – A wave of violence targeting Nigeria’s oil facilities shows no sign of abating and may get worse, analysts and security experts say.

Nearly a fifth of Nigeria’s oil supply capacity, or some 515,000 barrels per day (bpd), is shut in due to violence in the Niger Delta region in southern Nigeria, where nearly all of the West African country’s hydrocarbons are produced.

However, high oil prices and tight global supplies are giving energy companies reason enough to stay put in Africa’s top oil producer.

“What is happening now in the Niger Delta is bad, but it’s not the worst it has ever been,” said Kissy Agyeman, Africa security analyst at Global Insight. “The lure of the natural resources in Nigeria still outweigh the risk at the moment.”

The violence has helped support world oil prices, which surged to a record high above $100 a barrel in early January.

In the last two years, the Movement for the Emancipation of the Niger Delta (MEND) has bombed oil facilities, kidnapped foreign workers and attacked shipping in what it says is a bid to secure regional control over the area’s oil wealth.

But the rebel group has broken into several factions, making it increasingly difficult to hold peace talks with the government.

“The situation in the Niger Delta is difficult and it probably won’t get any better anytime soon. If anything, we may see a deterioration,” said Tony McClenaghan, senior analyst at security company Control Risks.

A group of Niger Delta rebels and activists said earlier this month that they would resume peace talks with the government, but a key faction of MEND refused to join — accusing the government of insincerity.

DECLINING PRODUCTION

Nigeria’s average output in 2007 declined 100,000 barrels per day (bpd) compared to the previous year to 2.14 million bpd due to a rise in militant attacks, according to the International Energy Agency.

This year has started off badly, with production expected to briefly dip below 2 million bpd in March due to security concerns and planned maintenance work.

Royal Dutch Shell, long the top oil operator in Nigeria, has been forced to shut down some output at its Bonny Light and Forcados export terminals, as security problems have made it difficult for workers to operate in parts of the delta.

Shell has now been surpassed by Exxon Mobil as the top operator due to the outages, according to industry sources.

But oil companies continue to invest in Nigeria because much of the country’s future output lies offshore, miles away from the violence of the Niger Delta.

“Nigerian oil is highly prized around the world,” said Lillian Wong of London-based think-tank Chatham House. “There is no indication that investment is drying up and in fact more money is going to offshore and gas exploration.”

Oil from Shell’s Bonga and Exxon’s Erha offshore oilfields have helped offset losses from their more vulnerable onshore counterparts.

Chevron and Total were expected to add their own offshore oilfields later this year, boosting production by more than 500,000 bpd.

(Editing by James Jukwey)

http://www.guardian.co.uk/feedarticle?id=7317818

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