Analysis: Shell station in Nigeria offline

The recent increase in violence by militants in the oil-rich Niger Delta forced Royal Dutch Shell to shut down operations.

The Anglo-Dutch major shut down operations at its Forcados terminal following pipeline attacks that threw its 100,000 barrel per day production offline, Shell officials said earlier this week.

The terminal had already been shut down once before because of violence and reopened in October 2007 after more than a year of halted production. Since its reopening, the facility, which can produce some 450,000 barrels per day, had been operating at a fraction of its capacity.

Last week's assaults on Shell's pipeline were followed by an attack on the vehicle of a top port official in Port Harcourt, the de facto capital of the delta and center of the region's oil and gas exports. Sotoye Itomi's driver was killed and a guard was wounded, according to local media reports. The Movement for the Emancipation of the Niger Delta claimed responsibility.

MEND and other militant groups have in recent weeks made good on promises to increase attacks on petroleum installations, raising fears that already-hampered production would be stymied further.

The attacks came amid efforts by President Umaru Yar'Adua to negotiate a peace settlement with the militants. For months, it appeared Yar'Adua's efforts would pay off as MEND said it would honor a cease-fire brokered while the president attempted to make good on promises to improve the lives of the residents of the impoverished delta.

Despite generating more than $300 billion worth of crude from the southern delta states over the last three decades, poverty and high unemployment persists. 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.

Yar'Adua said that in 2008 the delta's security would be chief among his concerns, adding the government would allot one-third of the country's $20 billion budget for the military and development projects in the region. Those promises, however, haven't dissuaded one militant leader, Ateke Tom, and his Niger Delta Vigilante Movement from waging numerous attacks in recent weeks.

Tom said recent attacks were in retaliation for the "unprovoked destruction and invasion" of homes at his base in Rivers state by Nigeria's Joint Task Force.

Analysts say the recent round of violence won't last much longer, as Tom and his militant group recently accepted a cease-fire.

"The recent spate of violence is unlikely to last for more than another several weeks into early February at the most, since already political pressure has led Tom to declare an unverified unilateral cease-fire," said Eurasia Group Africa analyst Sebastian Spio-Garbrah.

Despite the violence hampering production, analysts are predicting an improved security situation for the delta in months ahead and have forecast that Nigeria would exceed its production goals for 2008, set by the Organization of Petroleum Exporting Countries, as new offshore facilities are expected to come online.

Last week Nigeria received an offer from Russia's state-owned Gazprom, which approached energy officials in Abuja about investing in Nigeria's infrastructure in return for development rights.

"What Gazprom is proposing is mind-boggling," a Nigerian official told The Financial Times newspaper earlier this month.

The official said Gazprom was positioning itself as an alternative to the already deeply invested U.S., European and Asian firms that have been doing business in Nigeria for more than five decades.

"They are talking tough and saying the West has taken advantage of us in the last 50 years and they're offering us a better deal … they are ready to beat the Chinese, Indian and the American," said the official on condition of anonymity.

Gazprom officials confirmed that talks with Nigeria were indeed moving forward, setting the stage for the world's No. 1 gas firm to challenge longstanding players in Nigerian gas like ExxonMobil, Royal Dutch Shell and Chevron.

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(e-mail: energy@upi.com)