Date Published: 01/14/10

Niger Delta: Oil production shores up, uncertainties linger

OIL production activities in the Niger Delta, Nigeria's main oil and gas region, that has been an axis of low-intensity war since 2005, is currently on the upbeat.

This is largely due to the relative calm in the area which has given oil companies sufficient confidence to re-open oil fields, including some such as Shell’s shallow offshore EA field that has been closed for around three years.

Government officials in Port Harcourt, the Rivers State capital, are claiming November production of two million barrels per day. It could even be more because Nigeria has no effect system of measuring production levels.

However, this, according to the Stakeholder Democracy Network (SDN), a civil society group, ''is a significant improvement on the 1.6 million barrels per day that is the most credible low point for 2009, but obviously still well short of recognised capacity of at least 2.8 million barrels per day''.

Spokesman for the group, Gaia Sprocatia, in an on-line statement to our correspondent on Thursday, said payments to militants to keep the peace has continued and that there were even some relatively successful creative efforts, such as involving disbanded youths in extended state-sponsored Christmas festivities.

''However there were few fresh developments in December as most government attention was consumed by the jostling for political position in Abuja that surrounded President Umaru Yar'Adua's extended absence.

There were no moves with longer term potential other than the announcement of a fresh set of committees to manage the amnesty. A claimed warning strike by the Movement for the Emancipation of the Niger Delta (MEND) (with a threat to resume attacks in February) acted as a reminder that the substantial work to prevent violence is still ahead'', SDN said.

Even as situation in the oil region is uncertain, there are concerns about reports in the United Kingdom media over Christmas that Shell may sell onshore 'assets' to Chinese oil companies.

Although this has met with immediate controversy, Nigerian government officials are contesting whether Shell was entitled to make such a move.

All the areas mentioned are subject to both joint ventures with the government and licenses to operate that are presently due for renewal. Shell has not made any comment on the reports but they are consistent with known pessimism in the company about the viability of onshore operations..

Whatever the substance of Shell's repositioning, accounts of withdrawals being considered by the major oil companies (from inshore areas at least) have been circulating persistently for some time. The corporate pessimism about the Niger Delta emphasises the depth of problems and the failure of both government and oil company interventions to date.

A failure by government to follow up on the amnesty could well lead to a situation where decisions to withdraw or reduce exposure are consolidated. This would increase the prospect of Nigeria facing challenges in even maintaining its present level of oil production, not to speak of its ambitions of securing significant increases.