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Analysis: Nigerian oil regains top spot

By CARMEN GENTILE, UPI ENERGY CORRESPONDENT   |   Sept. 4, 2008 at 10:38 AM   |   Comments

Nigeria has regained -- albeit barely -- its top spot among African oil producers, despite continuing violence in the oil-rich Niger Delta.

According to the Africa Oil Journal, Nigeria's production increased by 400,000 barrels per day in July, compared with its June output, to 1.92 million barrels bpd. The bump in production helped Nigeria reclaim the continent's top spot from Angola, which reported a 1.9 million bpd output by the end of July, down 200,000 bpd.

Analysts speculated that the decrease for Angola was a production anomaly that would be corrected next month when production is scheduled to increase at two of the country's most lucrative oil fields.

Meanwhile, though Nigeria reclaimed its long-held No. 1 ranking among African oil producers, its production levels remain well below the 2.5 million bpd mark that the country was routinely hitting until a few years ago.

In 2005 a fresh wave of militant violence against foreign oil producers and attacks on oil installations caused output to drop dramatically and prompted some producers to pull up stakes and relocate their operations to the more politically stable Angola to the south.

Last month Nigerian Vice President Goodluck Jonathan -- a native of the Niger Delta and an ardent critic of the militant movement there -- said that violence had caused production to decrease by 650,000 barrels per day.

The losses incurred by continuing attacks by armed militant groups on oil and gas installations in the Niger Delta are costing the country almost $68 million a day in lost revenue, Jonathan said.

The vice president has been an outspoken critic of Nigeria's lopsided dependence on the region for the vast majority of its national revenue, calling it in recent months an economic curse.

"The overdependence on oil has put an unpleasant bracket in our national economic freedom," Jonathan said before lawmakers earlier this year in an effort to encourage them to diversify Nigeria's export portfolio.

He attributed the persistent poverty in Nigeria to a culture of corruption within the petroleum sector, giving rise to militant groups in the delta.

About 95 percent of Nigeria's revenue is generated by oil and gas, resulting in billions of dollars in state funds every year, though much of the country remains impoverished and underdeveloped.

Since the 1970s, Nigeria, until recently Africa's No. 1 oil producer, has pumped more than $300 billion worth of crude from the southern delta states, according to estimates. But high unemployment in the delta, environmental degradation due to oil and gas extraction, and a lack of basic resources such as fresh water and electricity have angered some of the region's youth and incited them to take up arms, forming militant groups such as the Movement for the Emancipation of the Niger Delta.

But while oil production in the delta and at offshore platforms has been interrupted numerous times since the emergence of MEND three years ago, not to mention decades prior by the armed group's predecessors, Angola's petroleum sector has remained relatively free from violent disruptions.

That's not to say Angola hasn't had its own share of difficulties with armed groups vying for its country's oil wealth.

Cabinda province, home to more than half of Angola's oil, has been the scene of violence blamed on the separatist group known as the Liberation of the Cabinda Enclave, or FLEC.

Many Cabindan separatists and members of FLEC who fled the province have returned and remain discontented with the Angolan government for not using enough of the country's oil revenue toward development.

Despite last year's peace deal between the government and those Cabindans seeking a separate state, chronic discontent persists among secessionists, prompting the Angolan government to keep up to 30,000 troops in the tiny province.

In March, three Angolan soldiers were killed in attacks blamed on FLEC. The military has since clamped down in the region in hopes of thwarting future attacks.

"Luanda (Angola's capital) will act to ensure that FLEC does not present an obstacle to the government's goals of becoming a major oil-producing state and using its wealth to become the geopolitical hegemon in south-central Africa," read a recent report by Stratfor Strategic Forecasting.

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(e-mail: energy@upi.com)

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