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Reuters: ANALYSIS-Nigerian vote stirs hopes for reviving oil output

13 Apr 2007 07:47:22 GMT

More  By Matthew Tostevin

LONDON, April 13 (Reuters) – Nigerian elections due to start this weekend are rousing some optimism in the oil industry of a rare chance to cool unrest in the main producing region and eventually bring back lost output.

While flare-ups during voting remain possible in the tense Niger Delta, few predict violence on such a scale it will cut production from the West African country by much more than the one fifth of capacity already factored in by world markets.

“In the run up to the election it is possible the outages will increase,” said Mike Wittner, Global Head of Energy Market Research at investment bank Calyon.

“But I think there is also a general expectation that after the elections the shut-in production will gradually start to come back onstream.”

Elections in Africa’s biggest oil producer start on Saturday with balloting for state governors and assemblies.

A week later follows a vote to replace President Olusegun Obasanjo, whose eight years in office have been marked by growing anarchy in the Niger Delta, where militants demand a greater share of billions in oil wealth for poor villages.

Clashes between troops and gunmen this week stoked fears of retaliation by the armed groups, whose fighters from the mangrove-lined creeks are behind attacks and kidnappings that have driven many oil workers from the region.

An estimated 600,000 barrels per day of oil is shut in. Nigerian output was estimated at 2.1 million bpd in March.

Industry optimists hope that Nigeria’s first handover from one elected president to another, as well as a change of ministers and locally powerful state governors, might allow space for a new look at resolving the delta’s problems.

SHELL HOPEFUL

Royal Dutch Shell , Nigeria’s biggest operator and with the largest proportion of oil shut in, has recently stoked optimism with talk of restarting output in the western delta in “a few months” rather than giving an even vaguer timeline.

“The most important thing is that we continue to talk with communities and the government and we hope that will help in the next few months to allow us to go back in,” said Eurwen Thomas of Shell. “But we’ll only resume operations if it’s safe.”

False hopes are nothing new in the Niger Delta, and there are plenty of reasons for things to go wrong.

Previous promises of a new start from the central government often foundered quickly in corruption and bureaucracy, while local administrations siphoned any new benefits before they could reach aggrieved villagers.

Youths recruited as thugs in previous elections sometimes found themselves unpaid and angry when former political masters no longer needed them, exacerbating tension. New officials can turn to plunder to pay back political sponsors.

Militant groups, particularly the Movement for the Emancipation of the Niger Delta (MEND), look more organised than in the past and possibly less susceptible to being bought off.

“I don’t see that in the first six to nine months after the transition, the new government will adopt a radically different strategy,” said Rolake Akinola, of London-base Control Risks.

“A full blown conflict is a remote scenario but we are seeing a continuation of the status quo in the Niger Delta.”

Bringing production back would also take a lot of effort. Staff would have to feel comfortable heading back to troubled areas even before technical work could start on testing and restarting closed installations.

At least 700 km (435 miles) of pipelines have been stolen during the closures.

“If the political situation after the elections quietens down it is not simply a matter of flipping a switch,” said Wittner. “The majority of what’s down is going to take months to bring back on stream if the situation allows it.”

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