Following its offer of amnesty to the militants in the Niger Delta, Nigeria hopes that investment in the oil industry may pick up strongly after the offer expires in early October, assuming that a sufficient number of militants have accepted by then.
Royal Dutch Shell, one of the key multinational energy companies operating in Nigeria, wouldn’t comment on the amnesty and cease-fire, but acknowledged that production problems in the African country continued. “Clearly there is a challenge in Nigeria continuing and that’s born out of partly the actions of the militants, partly the issues around funding and partly around the legislative framework in Nigeria,” a Shell spokesman told New Europe on August 27. “It is well known that production has been impacted not just for Shell but for other companies as well. It has been a significant impact on production through attacks against the infrastructure.
Three weeks ago, a natural gas pipeline operated by the Nigeria Gas Company and serving a plant operated by Shell was attacked by locals in the Niger Delta, a Joint Task Force spokesman said. The attack underscores the ongoing risk of violence despite the cease-fire. “The gas plant which is attached to that pipeline network is Shell-operated closed down because of supply,” the Shell spokesman said. The pipeline is serving the Utorogu gas plant in Delta State, in the western part of the region. Shell resumed operations at its Utorogu plant last week, but the firm has yet to complete repairs at its Soku facility. The closure of Soku has cut operations at Nigerian LNG, which supplies 10 percent of the world’s liquefied natural gas, to around 50 percent of capacity. Nigeria LNG, which exports 22 million of compressed gas, is controlled by a group of Western companies including Shell, Total and ENI unit Agip. State-run NNPC owns 49 percent.
Nigeria ranked eighth among the Organization of Petroleum Exporting Countries (OPEC), and is still struggling to regain its position as Africa’s leading oil producer having been overtaken by Angola. But militant activities in the oil-rich region have adversely affected the operation of the oil companies leading to a substantial reduction in oil production. The amnesty is the first step to bring peace to the region, the Nigerian government says. But Nigeria’s latest peace effort has been called a sham by the Movement for the Emancipation of the Niger Delta, an umbrella organisation for armed groups.
Oil accounts for 80 percent of Nigeria’s budget revenue. The amnesty will allow oil to flow again and development to begin, the government hopes. “Nigeria claims to have produced 1.75 million bbl/d in July although industry sources dispute that total as being too high,” Chris Weafer, chief strategist at Moscow’s Uralsib bank wrote in a note to investors. “What is not in dispute is that, should the conflict in the region end, then production could be rebuilt towards capacity of 2.5 million bbl/d relatively quickly. The government claims that current capacity is 3.2 million bbl/d but that is unlikely without a huge investment programme,” Weafer added.
Nigeria’s Petroleum Minister Rilwanu Lukman was quoted as saying by the press on August 26 that the country’s oil production which fell to about 1.3 million barrels per day recently due attacks by Niger Delta militants has risen to about 1.7 million bpd. “At the height of militant activities, the production dropped to about 1.3 million bpd and as I am talking to you now, we are doing about 1.7 million barrels of crude and 700,000 barrels of condensate,” Lukman told reporters. “Things are happening. Things are getting better. We hope it will even get better,” Lukman said after a weekly cabinet meeting, presided by President Umaru Yar’Adua.
Meanwhile, Shell said the weekend before last that it awarded contracts of over USD 900 million to indigenous companies in 2008. The company also said that its subsidiaries in Nigeria also paid more than USD 34 billion to the government in the past four years (2005-2008) as taxes, royalties and energy production. “We have a policy not to Nigeria but in a whole range of countries where we operate to use local suppliers where it is practical to do so. Nigeria is one such example where we would offer contacts where it appropriate to the local workforce to support their economy,” the Shell spokesman told New Europe.
Aug312009