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Seeking Alpha: Shell: Full Output Expected from Nigeria

Posted on Apr 5th, 2007

A year after shutting down over half its Nigerian operations amid militant violence, Royal Dutch Shell has reached an agreement with local communities in the Niger Delta and expects to resume full production in the area within six months.

A rebel group called Movement for the Emancipation of the Niger Delta [MEND] attacked several Shell facilities in the western delta in early 2006, forcing shutdowns that resulted in the loss of 500,000 barrels a day in production.

The group, which demands a chunk of the country’s oil revenue for the region, has targeted foreign oil companies and kidnapped their workers, holding them for ransom. The violence has pushed up oil prices and curtailed Nigeria’s plans to bolster its oil production.

Shell’s arrangement with local communities entails the company’s provision of “significantly” more work for villagers and businesses in contracts ranging from catering to boat leasing to maintenance work. Basil E. Omiyi, Shell’s managing director for Nigeria, claims he has not negotiated with MEND nor received any security guarantees. “What has changed is that the level of violence in that particular region has gone down,” he said.

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