Royal Dutch Shell resumes Nigerian production

Bob Moon Apr 5, 2007

Royal Dutch Shell resumes Nigerian production

Bob Moon Apr 5, 2007

KAI RYSSDAL: Nigeria is the biggest oil exporter in Africa. It’s part of OPEC. And for the past year, violence in the Niger River Delta has meant crude production there has been cut to a relative trickle.

Not good news for a world that uses crude by the millions of barrels a day. Royal Dutch Shell, in particular, has had its output cut in half. So you’d think the company’s agreement today to safely resume full production would be cause for celebration on the commodities markets.

And prices did edge down a little. But in the grand scheme of things, the dime that crude dropped doesn’t really amount to much. Marketplace’s Bob Moon spent the day trying to figure out why.

BOB MOON: When I called a leading oil trader in New York today to ask about the significance of Shell’s new agreement, his lack of response was telling. He said he hadn’t really read past the headline.

And it seemed most oil traders weren’t paying much attention.

Alex Gorbansky makes it his business to follow the oil business in Africa for Frontier Strategy Group. He says the deal has the potential to improve the flow of oil from Nigeria — but he’s only cautiously optimistic.

ALEX GORBANSKY: Yes, it’s a step in the right direction for Shell. However, I would expect that, at least in the short term, you’re going to continue to see interruptions in production and similar types of security challenges that we’ve seen in the past.

Gorbansky is concerned some of the more militant groups apparently aren’t a party to the deal.

Shell says it’s agreed to significantly increase the amount of work it awards local communities in exchange for being allowed back in to the western Niger Delta.

But UCLA political science professor Edmond Keller says Shell can only do so much on its own.

EDMOND KELLER: It doesen’t really satisfy the basic complaint that people in the Delta have. And that is, too much of their oil revenue goes to other parts of the country, and they reap only about 13 percent.

Keller also points out national elections in Nigeria are less than two weeks away, and they could yet cause their own kind of turmoil.

KELLER: It could very well be a disaster, you know. Worst case scenario, there’ll be another military coup, and we’ll be back to square one where we were 10 years ago.

Not to mention, he says, that other oil companies are being pressured to come up with their own agreements — leaving Nigerian oil production as uncertain as its ever been.

I’m Bob Moon for Marketplace.

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