Monday, July 27, 2009

Nigeria Struggles As Oil Output Falls

LAGOS 26 July 2009 Sapa-AFP


Nigeria, the world's eighth largest oil producer, does not know
exactly how much of the black gold it churns but one thing is
certain - three years of militant attacks have led to a sharp

The country of 140 million people has vast oil and gas reserves
but violent unrest since 2006 in the Niger Delta, the region that
lays the golden egg, has seen its fortunes nosedive.

Before the Movement for the Emancipation of the Niger Delta
(MEND), the most prominent and sophisticated armed group, came on the scene and began destroying oil facilities and kidnapping oil
workers, the nation produced 2.6 million barrels per day (bpd).

MEND, which says it is fighting for a greater share of the
Delta's oil wealth for local communities, declared a 60-day truce
on July 15 in response to a government amnesty deal.

Most analysts estimate current production at 1.2-1.4 million

Petroleum Minister Rilwanu Lukman Wednesday put the figure at
about 1.5 million bpd, less than half of the nation's capacity.

Oil export earnings fell by about half to 4.92 billion dollars
in the first quarter of 2009 compared to the previous quarter,
according to the National Bureau of Statistics, with falling global
prices adding to the pressure.

Reflecting the strain on its finances, Nigeria's foreign
reserves fell to 43.2 billion dollars in the first h! end of December.

In its last monthly report, the International Energy Agency
(IEA) said Nigeria's production fell to 1.72 million bpd in June
from 1.8 million bpd in May and 1.78 million bpd in April.

The most pessimistic of foreign analysts recently put production
at the end of June at between 800,000 and one million bpd.

"My current estimate is between 1.3 and 1.4 million bpd,"
Olivier Jakob of Petromatrix in Zurich said, adding that the IEA
figures were on the high side.

Behind the many figures, lies the stark reality that despite its
oil and gas riches, Nigeria faces huge development challenges made more difficult by the global economic slowdown.

In March, President Umaru Yar'Adua signed off on a 2009 budget
based on forecasts for oil output of 2.292 million bpd even as he
put the actual figure at 1.6 million bpd.

The president warned that if production did not rise and crude
prices continued to fall, the fiscal deficit for the year would go
above five percent of Gross Domestic Product (GDP).

For Nigeria's fast growing population, the outlook is uncertain.

The unresolved crisis in the oil-rich Niger Delta is further
compounded by tensions between the giant oil multinationals the
Nigerian authorities working out a new law for the industry.

The companies fear the proposed legislation, now before the
parliament, could impose heavy costs on them which they argue will
result in much reduced capital investment, in turn curtailing
future oil production.

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