Nigeria: Oil Production Shut Down Due to Local Violence

LAGOS, -- Nigeria's petroleum industry may not benefit from the bombardment of Iraq by the United Stated-led coalition after ethnic clashes last week forced multi-national companies to shut down of operations in Warri, one of the major oil-producing cities in the Niger Delta region.

Economists say the shut-down may mean that Nigeria will not benefit from the suspension of the quota allocated to member countries of the Organization of Petroleum Exporting Countries (OPEC), to make up for any shortfall arising from the Iraq war.

The announcement by OPEC President Abdullah al-Attiyah means member countries would be free to produce as many barrels of crude per day as their capacity could carry. Nigeria, which is the sixth largest producer of crude in the organization and derives more than 90 percent of its foreign exchange earnings from oil, currently produces two million barrels per day of crude.

However, economists say with the current violent crisis in the Niger Delta region and the shut down of flow stations, Nigeria will not benefit financially from the suspension of the OPEC quota and the bombing of Iraqi oil wells by American soldiers which has pushed international oil prices up.

Reports from Warri say military authorities rolled out armored tanks and deployed troops to several parts of the city to combat rampaging youths - suspected to be of Ijaw ethnic group - who were clashing with the Urhobos and Itsekiri tribes for the control of the water ways in the area.

Witnesses say a full scale war broke out between the army and the Ijaw youth with the army losing at least 10 soldiers during the skirmish.

The first contingent of 1,000 men of the combined Army and Navy had reportedly embarked on "a shoot-on-sight" operation at Okerekoko, an Itshekiri community, but the troops ran into an ambush on their way. A fierce battle is reported to have ensued resulting in 10 soldiers dead and several others injured. An additional 1,000 soldiers were then deployed to support the initial contingent.

Military sources told journalists in Warri that the army was disadvantaged by the fact that the Ijaw youth had superior knowledge of the area and were heavily armed and ready for battle.

The rampaging youths destroyed the village of Kporo, which is located near an oil terminal, bringing to 12 the number of Itshekiri communities destroyed since hostilities began on Wednesday last week. Police reports say at least 50 people have been killed and several injured in the renewed crisis.

One of the Ijaw youths, who refused to give his name, said they were fighting the government because of the total neglect of their area which produces oil. "We will make this place ungovernable for the federal government and their multi-national oil companies which degrade our environment without putting much back into the area. We will not relent until the government changes it's stand and takes care of this region," he said.

The action of the youths and the insecurity in the area have forced both Shell Petroleum Development Company (SPDC) and the American-oil giant, Chevron Texaco, - two oil producing giants in Nigeria - to shut down crude oil flow stations in the area. According to estimates Shell alone will lose 76,000 barrels of crude per day and Chevron Texaco a total of 140,000 barrels of oil a day.

Sola Omole, Chevron general manager, government and public affairs, in a statement said two contract workers from the Chevron Texaco Escravos Tank Farm were hit by stray bullets, one of them died while the other was treated and later discharged. He noted that the unrest was not directed at the company's operations or its workers.

"We learned that the unrest was aimed specifically at protesting political actions connected to the forthcoming general elections in Nigeria. The protest has since degenerated into inter-ethnic feud resulting in the burning of rival communities in the Western Niger Delta," Omole said.

But by Thursday, Chevron Nigeria Limited announced a shut-down of production from all of its onshore and swamp locations in the Western Niger Delta as a result of the unrest.

"The shut down of the onshore locations is a precautionary measure to ensure the safety of workers and guard against environmental damage in the case of an escalation of the situation," said Omale.

On Thursday the crisis spread to the neighboring Rivers State where ethnic Ogbogu youth groups seized a major flow station belonging to Elf Petroleum, alleging a breach of memorandum of understanding signed with the firm.

The Ogbogu flow station owned by Elf, a French firm, is one of the company's most extensive oil fields in Nigeria. The youth stormed the station accusing the oil multinational of deliberately undermining the interest of its' host communities despite signing a memorandum of understanding with them.

Last year Shell and Chevron faced the wrath of women in the Niger Delta region who were demanding better conditions for the exploitation of oil and degradation and pollution of their land and water due to exploration activities in the region.

The attack on Iraq Thursday pushed up prices of oil in London and New York. In London, the price of North Sea Brent crude surged to 27.06 dollars per barrel after hitting an early morning low of 25.53 dollars. In New York, the price of light, sweet crude rose to 42 cents above Wednesday's close of 30.30 after falling earlier to as low as 28 dollars a barrel.

OPEC which controls more than 40 per cent of the world's crude supply, operates the quota system as a control mechanism to ensure market stability. Thursday's announcement of the lifting of the quota was aimed at maintaining world oil supplies and prices in the event of the disruption to Iraqi crude export.

With the suspension of quota system, Nigeria could push 2.6 million barrels per day crude compared to official output of 2.018 million barrels p er day for this year. This will represent additional oil output of 582,000 barrels per day and a substantial boost for the 2003 national budget.

• 107 Energy