Nigerian oil producers gear up to raise output

www.forbes.com Reuters, 01.13.03, 8:46 AM ET     By John Chiahemen

LAGOS, Jan 13 (Reuters) - Multinationals producing Nigeria's oil said on Monday they were primed to immediately boost production after OPEC's agreement to raise the cartel's output ceiling to stave off a global price shock.

Oil companies in Nigeria have been complaining for months about production curbs of the Organisation of Petroleum Exporting Countries, which came after they had invested hundreds of millions of dollars in new Nigerian fields.

The Nigerian unit of Royal Dutch/Shell <RD.AS><SHEL.L>, the country's top producer, said it expected to add output from its new EA oilfield following OPEC's decision on Sunday to raise quotas for its 10 members.

"We have extra capacity from a number of oil wells not yet put into operation," Shell Nigeria spokesman Don Boham said.

"The EA is a new offshore project which we started slowly, but which we intend to prime up," he said.

But being a new well, it could take a few months for oil to flow significantly from there, he added.

Shell said the shallow water EA came on stream last month but was only producing at a fraction of its capacity of about 140,000 barrels per day (bpd).

Shell is operator of the field with state-run Nigerian National Petroleum Corp (NNPC), France's TotalFinaElf <TOTF.PA> and Italy's Agip <ENI.MI> as shareholders.

Shell said earlier this month its crude output in December rose to its highest level for the year at 845,000 bpd.

The multinational, which accounts for almost half of Nigeria's crude production, saw its output fall in the first half of 2002 to an average of around 660,000 bpd due to Nigeria's stringent OPEC compliance.

But output rose steadily in the second half after the country loosened its grip on compliance.

Other fields due to come on stream in Nigeria this year include two in the country's promising new deep sea frontier. Agip is expected to tap first oil from its Abo deep offshore field next month while TotalFinaElf should start production from its 125,000 bpd Amenam field around June.

SHARE OUT In the quotas shared out in Vienna on Sunday to stem a price spike threatened by a strike in Venezuela and war in Iraq, Nigeria was allocated an additional 124,000 bpd to bring its quota to 2.018 million bpd.

A senior official at ChevronTexaco (nyse: CVX - news - people) Nigeria said the U.S. major did not need to bring on any additional capacity to take advantage of an increased output share.

"We're way under capacity," the official said, quoting a figure of between 80,000 and 100,000 bpd below capacity.

A spokesman for ExxonMobil (nyse: XOM - news - people) said Nigeria's second largest producer had the capacity to raise output beyond its assigned 365,000 bpd.

The NNPC will assign new output figures to its foreign joint venture partners over the next few days based on its assessment of their capacities, oil company officials said.

Although production capacities of the oil companies are monitored by NAPIMS, NNPC's investment arm, industry sources say higher quotas are still subject to intense lobbying at the state company's headquarters in Abuja.

"I am sure everybody will be there lobbying for new quotas," one company official told Reuters.