Financial Times: Violence in Nigeria forces Shell to cut output (ShellNews.net)

By Michael Peel in Lagos and James Boxell in London

Published: September 29 2004

Royal Dutch/Shell said yesterday it had suffered its first production loss as the result of violence in Nigeria's oil-rich and troubled Niger Delta, where a militia leader has condemned oil multinationals and warned foreigners to leave the area.

The military taskforce set up in response to growing violence in the region called for calm but warned militia leaders to "stop stirring internal insurrection" and said "crack teams" of troops were ready to respond to trouble.

As oil prices have surged, international attention has turned to the situation in the deprived and polluted Delta. The conflict there has worsened amid public resentment of the government and oil companies, violent local politics and oil theft thought to be organised by cartels with official connections.

Shell, the producer of almost half Nigeria's daily output of almost 2.5m barrels of oil, said it had shut down 28,000 barrels a day of production because of a technical problem at a facility that its support staff could not reach.

The company said it had "curtailed" movement of staff and supplies through the creeks of the eastern Delta, where Alhaji Mujahid Dokubo-Asari, leader of a militia group known as the Niger Delta People's Volunteer Force, said this week he could not be responsible for the safety of foreign nationals beyond the start on Friday of a campaign known as Operation Locust Feast. The violence in the Delta is the latest threat to oil output in Nigeria, which supplies about 10 per cent of US crude imports.

Mr Dokubo-Asari has called for self-determination for his Ijaw people and claims he is being attacked by government forces as part of a security crackdown supported by oil multinationals. Shell has denied claims that it supplied maps to security personnel, while Eni of Italy has denied similar accusations that one of its helicopters was used by members of Nigeria's armed forces.

ChevronTexaco, the third-largest producer, said it took Mr Dokubo-Asari's threats "quite seriously" and that it was in touch with the government, which had the primary responsibility for ensuring security.

Chevron still has about 140,000 barrels a day of production shut down in the western Delta, where violence worsened last year and caused the temporary halt of more than a third of the country's oil output.

Shell refused yesterday to speculate on whether the security threat meant more of its production could be closed down temporarily. The company is understood to be treating the situation seriously but believes it impossible to say how long the troubles could last. Last year social unrest forced it to cut production by 320,000 barrels a day.

Bruce Evers, oil analyst at Investec, said: "This has been an ongoing struggle for Shell for many years. The current shutdown is neither here nor there in terms of overall production but they will be nervous about the situation escalating."

Italy's Agip and France's Total, which also have interests in Nigeria, said the threat did not affect production but was being monitored closely.

A new eastern Delta military joint task force - known as Operation Flush Out 3 - advised Nigerians and expatriates to go about their business normally, adding that it had troops on standby. "The joint task force is being catalysed to manifest full military colours in the creeks," it said. "Any gang who doubts our resolve should strike first."

Mr Dokubo-Asari has the highest profile of a number of gang leaders in Rivers state - in the Delta - who are widely thought to have been armed with rifles and machine guns by ambitious politicians ahead of controversial national elections last year. The polls were heavily criticised for ballot-rigging and intimidation.

A skilled and articulate self-publicist, Mr Dokubo-Asari is a maverick figure who converted to Islam and says he admires Osama bin Laden. His claims of ill-treatment of the Ijaw people, the largest ethnic group in the Delta, are widely echoed, although a number of members of his rag-tag army say they fight with him primarily because they were driven from their homes by members of a rival militia.