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Financial Times: Shell to raise Nigeria oil production

By Dino Mahtani in Abuja
Published: April 5 2007 13:38 | Last updated: April 5 2007 13:38

Royal Dutch Shell, Nigeria’s largest oil producer, has said it is expecting in the next five or six months to bring back around 500,000bpd of production lost following militant attacks in the Niger Delta last year.

The total represents roughly half of Shell’s oil production from Nigeria.

Basil Omiyi, Shell’s top executive in Nigeria, said in an interview with the Financial Times and New York Times this week that the company had started repair works about two weeks ago on oil facilities in volatile parts of the delta that had been off-limits for security reasons up until now.

The production was lost during a wave of militant attacks by the Movement for the Emancipation of the Niger Delta (Mend), which targeted the company as part of its overall strategy of forcing Nigeria’s government to release two prominent delta leaders from detention and recompensate delta communities for environmental pollution.

Mr Omiyi said: “We could have gone back earlier but I was erring on the safe side.” He said that local communities, which harbour many militants, had been “asking us to come back for some time”.

Mr Omiyi said that the timeline of the repairs would not be subject to Nigeria’s elections due this month, which many oil security analysts feel could heighten tensions and spark further militant activity.

He added that militant activity in the western delta, from where the lost production is normally sourced, had diminished significantly over the last year, allowing the company to re-engage local community leaders and negotiate safe passage for repair teams.

Shell has said the repairs coincide with a new corporate strategy of involving as many local communities as possible in servicing its local needs, which could include oilspill cleanups, pipeline maintenance, catering and local labour.

In 2004, an internal report commissioned by Shell reported that the company’s community development programmes had increased tensions in the delta by pitting communities that were receiving contracts against those that claimed they were receiving nothing.

Last year Shell admitted that two local companies it had given work to in the western delta had links to Mend. Mr Omiyi said that the new strategy would nonetheless work because it would involve entire communities, and that it was impossible to “sieve out” militant sympathisers from the communities with which Shell expects to agree contracts.

The company said it would be taking its own measures to exercise due diligence on the selection of communities for such contracts.

Mr Omiyi said the total amount to be spent on issuing contracts to communities would exceed Shell’s spending on community development programmes and contributions to the Nigerian government’s own community development programmes. That figure has exceeded $140m a year recently.

This week the last remaining expatriates taken hostage in the delta were released. The ruling People’s Democratic Party, which has a strong presence in the region, has selected Goodluck Jonathan, a state governor from the delta, as its vice-presidential candidate in this month’s polls.

Mr Jonathan, who comes from the delta’s majority Ijaw tribe, has partly based his campaign on promising an end to hostage-taking. Political analysts say that he has a better chance than any other electoral candidate of making promises to militant groups that could see their activities wind down.

Copyright The Financial Times Limited 2007

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