allAfrica.com: Nigeria: Future of Country's Oil At Risk (Page 1 of 2)

Unless drastic measures are taken to curtail the activities of militants in the Niger Delta region, Nigeria would have to struggle to extricate itself from the economic consequences of the crisis in the next few months. Monitors and experts in the energy sector say the seeming criminal activities of the militants in the region, which had in the last few months hugely affected the sector negatively, would snowball into a serious economic crisis for the nation, if not checked. As one expert put it: "The Nigerian oil industry may soon be in the throes of the development in Angola at the heat of the civil war in the 1980s."

"At the heat of the Angolan civil war, oil companies enacted a gradual wind-down process, which eventually saw them shutting down their production in the country despite the huge investment they made.

"The first casualty of the gradual wind-down were explorations. As the war escalated, it was clear to the oil firms that the country had no future", an energy consultant told LEADERSHIP last night.

"The companies therefore halted exploration and only managed to produce from existing oil wells as long as the hostilities in the battlefields allowed.

"With time the hostilities were so encompassing that even production on existing wells was drastically reduced.

"Nigeria is currently at the first phase of the gradual wind down process and if the militancy in the Niger Delta is not halted the second and more dangerous phase would follow".

Reports in the last few days indicate that the oil companies have frozen exploration activities in the region. The search for new oil fields in the region has since been grounded. No oil reserve has been discovered in the area in the recent past. The little exploration going on in the country is in the deep offshore.

An insider said, "Most of the companies are now moving to Angola and exploration for oil in the country is intensifying."

Even the Organisation of Petroleum Exporting Countries (OPEC) is responding appropriately to the escalating militancy in the Niger Delta. Two years ago Nigeria's oil quota in the cartel was 2.5 million barrel per day (2.5mbd). But as militancy shuts out production in the nation's oil fields the cartel has responded by reducing Nigeria's quota and allocating it to other countries, where production is not inhibited.

Angola's production quota in the cartel now hovers around 2.5 mbd while Nigeria now labours to fill the 1.5mbd grudgingly allocated to it by the cartel.

Industry watchers contend that the halting of exploration activities in the Nigerian oil fields is a "dangerous development" because even if the situation does not deteriorate to the point where production would have to be frozen, the current trend has drastically reduced the chances of shoring up Nigeria's proven oil reserves, which was expected to hit the 40 billion barrel mark by the year 2010. This situation is already creating panic.

Head of media and publicity of the Nigeria Labour Congress, Mr. Owei Lakemfa, said: "As you know, there is crisis in the country in general; with the Niger-Delta issues there is no how production can continue in the area, and that it is already affecting everyone in the country, including the government, the workers and the companies operating in the region.

"The recent slump in Nigeria's oil output may have been disastrous for Africa's largest oil producer, but problems could worsen".

Also, the chairman of the Senate Committee on Sports, Senator Heineken Lokpobiri, said the crisis would adversely affect the nation's economy. According to him, "It is obvious that the crisis would affect the nation because billions of naira are wasted while oil facilities are being destroyed. And I think what Nigeria should do now is to ensure that we find a lasting solution to the problems in the Niger Delta, that has to do with sustainable development.

"What we are doing today, the 2008 budget for the Niger Delta is simply not enough and the people are left with so much hopelessness. The situation is so bad that even we, the lawmakers, can no longer go home".

The lawmaker, who hails from the crisis-ridden region, also attributed the problem in the Niger Delta to the inability of Federal Government to release the statutory funds for the region, stressing that it would further aggravate the problems and crisis in the region.

In April, striking Exxon Mobil workers and wave of attacks on oil infrastructure by militant groups knocked more than half of the nation's quota for OPEC - 2.16-million-barrels-a-day. That contributed to propelling the Nymex light sweet crude-oil contract above $126.20.

Attacks have increased significantly in the region in recent weeks and damage to pipelines has forced Royal Dutch Shell's Nigerian joint venture, Shell Petroleum Development Corporation, to hold back more than 160,000 barrels a day from its Bonny Light oilfield.

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