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Outlook for Nigeria oil output worsens after latest attack

By Sally Jones
Of DOW JONES NEWSWIRES
LONDON (MarketWatch) -- The outlook for Nigeria's crude oil output deteriorated further Wednesday after a flowstation owned by a unit of Eni SpA (E) was attacked overnight.
News the Ogbainbiri flowstation in Bayelsa State in Nigeria's oil rich Niger Delta had been attacked drove U.S. light, sweet crude futures for September delivery up 0.7% to $74.07 a barrel.
An initial statement from Eni suggested the disruption had caused a "significant decrease" in crude developed at the facility. Nigerian insiders, however, said the impact was marginal and only between 16,000 to 35,000 barrels-a-day of crude oil had been cut at the Nigeria Agip Oil Company's facility.
But the disruption is the latest in a wave of similar attacks by militants as they fight for regional control of oil and gas resources in the region. Including the latest disruption, attacks by the Niger Delta militants have now cut Nigeria's production by over one third, or 715,000 b/d.
Nigeria, a key member of the Organization of Petroleum Exporting Countries and the world's eighth largest oil exporter, relies heavily on foreign oil majors to develop its oil and gas sector.
Royal Dutch Shell's PLC (RDSA) oil facilities in the Niger Delta have also been heavy disrupted in recent months, largely due to militant attacks. Close to 680,000 b/d of Shell's Nigerian production is now believed to be shut-in, after 180,000 b/d was shutdown due to a pipeline leak, late last week in the eastern delta.
Nigerian oil officials warn the attacks will get worse, especially in the run up to Nigeria's presidential election in May 2007. Militants have also threatened to raise the scale of attacks next month.
"Already the Nigerian government has very little control of these kind of activities in the delta," said one Nigerian industry source. "Militants will raise their game in the run up to the elections."
News of Tuesday night's attack comes the same day Niger Delta militants threatened to destroy the Olokola Liquefied Natural Gas, or OKLNG, plant being planned for western Nigeria.
In an e-mail message Wednesday, Cynthia Whyte, self-acclaimed spokesperson of the Revolutionary Council, said: "We will sabotage the pipelines. We will ambush and attack its workers. We will take hostages. We will sabotage the project's logistics and vandalize every facility we set our eyes on."
The threat came after partners in the OKLNG Tuesday signed a memorandum of understanding to use a free trade zone for the $6 billion project.
In an email to Dow Jones Newswires Wednesday, the Movement for Emancipation of the Niger Delta said they will commence a wave of attacks on facilities in both the eastern and western parts of the region.
"Our next wave of attacks against the eastern and western delta commences mid August," Jomo Gbomo, self acclaimed spokesman for the movement, said, adding his group planned to "shut down all export terminals this time around."
MEND is a coalition of militia groups in the Niger Delta. Most of its threats of attack on the oil facilities have been carried out, with varying degrees of success.
Despite the recent problems tapping into Nigeria's huge hydrocarbon reserves still remain a priority for foreign oil firms.
Wednesday, Exxon Mobil Corp. (XOM) said today that its affiliate, Mobil Producing Nigeria Unlimited, has started up an oil recovery project offshore Nigeria. It is expected the project will produce 530 million gross barrels of additional oil reserves and will provide a peak volume of 120,000 b/d.

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