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International Herald Tribune: Despite obstacles, oil companies flock to Nigeria

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A militant guarding a waterway in the Niger Delta. Nearly a fifth of Nigeria’s oil capacity is shut down due to violence in the region. (George Esiri/Reuters)

By Randy Fabi ReutersPublished: February 19, 2008

ABUJA, Nigeria: A wave of violence aimed at the oil industry in Nigeria shows no sign of abating and may get worse, analysts and security experts say.

In the past two years, the Movement for the Emancipation of the Niger Delta 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.

Nearly a fifth of the West African country’s oil capacity, or about 515,000 barrels a day, is not being produced because of violence in the Niger Delta region, where nearly all of Nigeria’s hydrocarbons are produced.

But with oil prices high and global supplies tight, energy companies are willing to risk the violence to stay in Africa’s top oil producing country.

“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 the research group Global Insight. “The lure of the natural resources in Nigeria still outweighs the risk at the moment.”

Nigeria’s average daily output declined by 100,000 barrels last year, to 2.14 million barrels, amid a rise in militant attacks, according to the International Energy Agency.

This year has started off badly, with production expected to slip below two million barrels a day in March because of 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. The outages have allowed Exxon Mobil to overtake Shell as the top producer, industry officials said.

But much of Nigeria’s potential output lies offshore, far from the violence of the Niger Delta.

“Nigerian oil is highly prized around the world,” said Lillian Wong of the research institute Chatham House in London. “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 fields have helped offset losses from their more vulnerable onshore counterparts. Chevron and Total are expected to add their own offshore fields this year, raising production by more than 500,000 barrels a day.

http://www.iht.com/articles/2008/02/18/business/oil.php

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