The Wall Street Journal: Nigeria: Can Maintain Oil Output If Unrest But At A Cost (ShellNews.net)

DOW JONES NEWSWIRES

August 6, 2004

Posted 7 August 04

LAGOS -- Nigeria has found a way of mitigating the impact of disturbances in its oil producing region by promptly bringing unaffected areas into production to offset output cut off by these conflicts, a senior government official told Dow Jones Newswires this week.

"If there is a shut-in somewhere, we go to a calmer area to balance the production," Billy Agha, a deputy director at the Department of Petroleum Resources, told Dow Jones Newswires this week in Abuja, on the sidelines of a conference on oil and gas.

DPR is the regulator of Nigeria's oil and gas industry.

While this approach succeeds in maintaining Nigeria's output, Agha said however that "the country's production costs may increase" as a result.

"When it happens, we have to come up with plans that we didn't have before," he explained.

Nigeria is the fifth largest supplier of oil to the U.S., but supplies are often threatened by internal conflicts.

Shut-in of crude oil production is a common feature in Nigeria's Niger Delta, where ethnic conflicts often result in work stoppages by oil companies.

Oil companies are also forced to shut-in production as a result of attacks on their facilities and personnel by armed gangs in the region, who sometimes allege neglect of the host communities by the companies.

Last year, fighting between ethnic groups in western Niger Delta forced multinational oil companies to shut-in about 800,000 barrels a day of oil, or about 40% of Nigeria's OPEC quota then.

Two of the companies affected - ChevronTexaco Corp. (CVX) and Shell Petroleum Development Company of Nigeria, a unit of Royal Dutch/Shell (RD) have reopened most of the facilities they shut down last year.

Agha said however that "quite a number of wells" are still shut down in the Niger Delta. He gave no details.

Attempts by ChevronTexaco to reopen some of its shut facilities resulted in the death of some of its workers, including two Americans, who were shot by an armed gang while being transported on a boat.

A military task force raised by the Nigerian government to arrest the rising level of insecurity in the Niger Delta has since arrest people suspected to be member of the gang that killed ChevronTexaco's employees.

The government has also set up a committee to reconcile the warring communities in the Niger Delta.

-By Vincent Nwanma; Dow Jones Newswires; +234-1-585-0849; vinwanma@beta.linkserve.com