Dow Jones NewsWires Tuesday March 25, 3:00 AM By Selina Williams OF DOW JONES NEWSWIRES

LONDON (Dow Jones)--Nigeria's worst ethnic violence in years sent shock waves through global oil markets Monday as three supermajors suspended production at their facilities in the Niger Delta and withdrew staff on safety fears.

The Nigerian subsidiaries of Royal Dutch/Shell Group (RD), ChevronTexaco Corp. (CVX) and TotalFinaElf (TOT) have halted production totaling 817,500 barrels a day - close to 40% of Nigeria's output of some 2 million b/d - as violence between rival communities spirals out of control ahead of presidential elections on April 19.

Shell and Chevron have also declared a force majeure - a formal notification to customers that they might not be able to lift their contracted crude when scheduled - on Bonny, Forcados and Escravos crude grades.

"It's a grave situation and the long-term implications of this are yet to be considered," said a Chevron spokesman speaking by telephone from Nigeria.

The loss of crude from the fifth-largest oil supplier to the U.S. comes at a time when global oil markets nervously eye the prospect of a prolonged war in Iraq that could have a more significant impact on supplies than initially anticipated.

It also comes as U.S. commercially held petroleum stocks are close to rock-bottom levels after a strike in Venezuela and as U.S. refiners are keen to get their hands on the light sweet Nigerian crudes that are so good for refining into gasoline ahead of the summer driving season.

The shutdowns will cost the companies and the country dear in lost revenues.

At a price of around $25 a barrel Nigeria's lost oil output is worth more than $20 million a day. That is a hefty amount for a country that receives some 90% of its foreign exchange earnings from oil exports.

But the Organization of Petroleum Exporting Countries, which has pledged to meet any shortfall in global oil supplies, played down disruptions to output by Nigeria, an OPEC member.

Events such as those in Nigeria "have happened in many countries, many times...this is a temporary event," said OPEC President Abdullah al-Attiyah in comments to Cable News Network earlier Monday.

"Nigerian oil will come back to the market," al-Attiyah added.

Technical Problems May Stall Restart Of Wells

But a prolonged shutdown of Nigeria's oil wells could make it difficult to restart them as pressure drops and other technical measures need to be taken to restart output, said David Fyfe, oil supply analyst at the Paris-based International Energy Agency.

"The longer they're off, the lower the pressure drops and the more work they'll need to get them up and running again," Fyfe said.

For the moment, none of the companies know when their production will return.

Shell and Chevron have evacuated several hundred staff, both local and expatriate, out of the afflicted region in the northern and southern swamps in the western Niger Delta.

Expatriate staff had the option to go home when they were evacuated and several took the opportunity, said spokesmen from the oil companies. Other personnel were at the end of their rotation period and were due to leave anyway.

Further disruptions could occur as Nigeria's two most powerful oil workers unions, the National Union of Petroleum and Natural Gas Workers Union, or Nupeng, and the Petroleum and Natural Gas Senior Staff Association of Nigeria, or Pengassan, threatened to withdraw members, fearing for their safety.

"We have told them (the companies) to evacuate our members from that place until there is peace," Nupeng General Secretary Joseph Akinlaja told Dow Jones Newswires by telephone.

Pengassan General Secretary Kenneth Narebor said the union would be forced to withdraw members if the violence continued. The violence showed no signs of abating Monday.

Government troops have been trying to restore order in the region, but with little effect.

According to the Associated Press, Ijaw militant activist leader Dan Ekpebide repeated threats Monday to blow up six ChevronTexaco installations - along with three Shell and two TotalFinaElf facilities that have been captured by militants - unless the Nigerian military halts its crackdown and pulls out.

Clashes between the Ijaws, the largest ethnic group in the Niger Delta, and minority Itsekiris over recent weeks have left scores dead and dozens injured.

When asked if there would be more shut ins in other locations or if violence could spread to the eastern Niger Delta, a regional Shell official in the area's oil town Warri said: "We don't know - it's clearly beyond our control."

Some analysts suggested that additional output from fields in the eastern Niger Delta could be brought on line to cover for the loss.

But the Energy Information Administration in the U.S. scotched that idea in a report Monday, when it estimated the country has no spare capacity left.

The near-$9 freefall in global oil prices in recent days on expectations of a swift end to conflict in Iraq has been stalled in part by the troubles in Nigeria, dealers said.

"Nigeria's becoming the main focus today," said one broker at London's International Petroleum Exchange where European Brent crude futures are traded.

"The fear is it could last for a while, and everyone's nervous after Venezuela," he added.

At 1850 GMT, IPE front-month May Brent was up $1.68 at $26.03/bbl.

-By Selina Williams, Dow Jones Newswires; +44 207 842 9262; selina.williams@dowjones.com (Vincent Nwanma in Lagos contributed to this report.)

<a href=www.smartmoney.com>Dow Jones Newswires March 24, 2003 By David Bogoslaw

NEW YORK -- With few options to make up for production lost from the shuttering of oil and natural gas facilities in the Niger Delta, ChevronTexaco Corp.'s (CVX) second-quarter earnings could take a hit of as much as 20 cents a share.

"Every 3% of their volume that is up or down impacts quarterly earnings by nine cents per share," said Tyler Dann, an analyst at Banc of America Securities.

Chevron Nigeria Limited, a unit of the San Ramon, Calif., integrated oil company, said Sunday it was relocating workers and had shut in 440,000 barrels of oil a day in production in the Western Nigeria Delta in response to ethnic tension in the country.

Amid civil unrest between rival ethnic groups, the Ijaws and Itsekiri, leading up to April parliamentary and presidential elections, the Ijaws threatened to blow up multinational oil installations they said they'd captured in retaliation for government military raids, the New York Times reported Monday.

"We aren't anticipating any sizable new field additions in the second quarter," Mr. Dann said. "Most of that production lost won't be regained until this conflict is resolved."

But he said he wouldn't revise earnings estimates for the quarter until he had a better idea of how long the shut-in would last. While he doesn't own stock in the company, he said Banc of America does investment banking for ChevronTexaco.

The company will potentially face a double whammy in the second quarter, however, from reduced production volume and significantly lower oil prices now that the war with Iraq has begun, warned Fadel Gheit, an analyst at Fahnestock & Co.

But he said it's "highly unlikely this will last long enough to have a meaningful impact on the earnings of any of (the) companies" active in the Niger Delta.

Shell Development Petroleum Co., a unit of Royal Dutch/Shell (RD) in Nigeria, has shut in 370,000 barrels a day, and French oil producer TotalFinaElf SA (TOT) closed down 7,500 barrels a day from its Nigerian operations, the companies said Monday.

The sole bright spot in the second quarter will be the downstream segment, where an increase in refining margins of $1 a barrel would more than offset the financial impact of lost production in Nigeria, Mr. Gheit predicted.

Mr. Gheit said that while he owns Chevron shares, Fahnestock has no investment-banking relationship with the company.

The shut-in of 440,000 barrels of day includes ChevronTexaco's deepwater platforms that feed into the Escravos export terminal and storage facility, said Fred Gorell, a company spokesman. The Escravos terminal is one of the installations threatened by Ijaws.

But Mr. Gorell said he wouldn't speculate on the potential impact on earnings or how much of the lost production ChevronTexaco could offset with increases at its other facilities.

Shell's shut-in affects only the swamp regions, not its one deepwater platform, according to Simon Buerk, a group spokesman for the Royal Dutch/Shell Group.

Mr. Buerk anticipates a rapid return to normalcy, contingent on the safety of Shell's staff and contractors.

If the Nigerian operations were to be shut-in for a full 90 days, ChevronTexaco would likely lose between $75 million and $100 million in pretax operating earnings, based on an average price of $27 a barrel for the year, said Mr. Gheit, the Fahnestock analyst.

ChevronTexaco's exposure in Nigeria is limited to its 40% stake in the delta's production facilities under a production-sharing agreement with the Nigerian National Petroleum Corp.

"The fact that the government has a stake makes it likely to be resolved. This is their lifeblood," Mr. Gheit said.

Mr. Dann, the Banc of America analyst, agreed that the Nigerian government has a significant interest in facilities being reopened as quickly as possible.

Still, Nigeria is more vulnerable to ongoing production disruptions than Venezuela, for example, due to long-standing ethnic and religious conflicts in the country, which aren't likely to disappear, he added.

ChevronTexaco recently said it would scale back its production growth expectation to 1.2% for 2003 from a previous target between 2% and 3%.

Although the potential bite into earnings is something of a red flag for investors, it's less significant than if it were the company's own doing, Mr. Dann said. However, investors might become less forgiving the longer the disruption lasts, he added.

The Organization of Petroleum Exporting Countries said it would make up the shortfall from Nigeria, one of its members. With most other OPEC members at or approaching maximum production capacity, it would probably fall to Saudi Arabia to raise its output, Mr. Dann said.

• David Bogoslaw, Dow Jones Newswires; 201-938-5289 (END) Dow Jones Newswires 03-24-03 1308ET

Unrest... By Somini Sengupta March 24 2003

Unrest ... members of the Ijaw ethnic group fled from Warri in the oil-rich Niger Delta as oil majors declared force majeure on Friday.

Though oil prices fell to a three-month low on Friday as US-led forces advanced into Iraq, a new threat to supplies is building in West Africa: ethnic conflict has begun to limit oil shipments from Nigeria and could complicate US refiners' efforts to produce more petrol for the Northern Hemisphere spring and summer.

Royal Dutch-Shell, the largest oil producer in Nigeria, invoked force majeure on Friday, effectively warning customers that events outside the company's control could delay oil deliveries by up to two weeks from its Bonny and Forcados terminals.

ChevronTexaco made a similar announcement on Thursday, though the group did not specify the potential duration of the delays from its Escravos terminal.

In making the announcements, officials with both companies sought to play down the effect of the violence in the oil-rich, but volatile, Niger Delta, emphasising that production continued in other parts of the area. However, both companies have evacuated their employees from the delta.

Simon Buerk, a Shell spokesman in London, said that the company had reduced production by 176,000 barrels of oil a day because of the clashes in the delta. Normally, Shell pumps an average of about 800,000 barrels a day from Nigeria.

ChevronTexaco, whose average production hovers around 460,000 to 470,000 barrels a day, has lost about 140,000 barrels a day, according to Sola Omole, a company spokesman in Lagos.

While civil strife frequently disrupts exports from Nigeria, some oil analysts warned that with so many problems bedevilling world oil markets, a prolonged reduction in Nigerian oil shipments could send prices higher once again.

"This has been building for months but it has been tremendously overshadowed by events in Venezuela, then Iraq and the cold winter we've had," said John Kilduff, senior vice-president of energy risk management at the New York office of Fimat USA, a unit of the French bank Societe Generale.

"Nigeria is a key source of supply and, in this kind of situation, we need every barrel."

Lately, oil markets have focused almost exclusively on Iraq, with prices falling as American and British forces advanced with little resistance. The price of oil for May delivery fell $US1.21, or 4.3 per cent, to $US26.91 a barrel at the end of trading on Friday on the New York Mercantile Exchange. The near-month oil contract had not closed that low since December 4 last year.

In December tensions in Venezuela sparked a nationwide strike that brought oil exports to a halt. The concern among analysts is that events in Nigeria could similarly blindside traders.

The ostensible cause of the violence in the Niger Delta is the way political representation has been apportioned in advance of Nigeria's April 19 elections, when the country is attempting its first peaceful transition from one civilian government to another since independence in 1960.

The fighting, which began on March 12, pits two of the largest ethnic groups, the Ijaw and the Urhobo, against the Government of President Olusegun Obasanjo, whom they accuse of favouring minority Itsekiris in the design of the election.

The violence has continued unabated between armed militias from those ethnic groups and the Nigerian military, killing at least 10 soldiers and an untold number of villagers from the region. The Ijaw have long complained about political representation and limited access to the oil riches of the delta. This week, they threatened to disrupt oil facilities if the Nigerian military fired on them.

With elections approaching, bringing fears of escalating political violence, hundreds of civilians have fled the delta in recent days, some crowding into oil terminals in hopes of being airlifted by oil company helicopters.

Members of the Itsekiri tribe filled a ChevronTexaco terminal earlier this week after their villages were attacked. Helicopters hired by the multinationals to evacuate their own workers were also used to ferry villagers to the southern port city of Warri. Local leaders reported that a dozen villages had been raided. Officials at the Nigerian army command centre in Warri refused to comment on Friday night.

Nigerian crude oil is a coveted light sweet oil that yields more gasoline and diesel than sour grades of crude. While a great deal of oil is on its way to the US from the Middle East, it is nearly all sour crude.

"I think the loss of volume is interesting but it's the quality of the crude that is more important," said Lawrence Goldstein, president of the Petroleum Industry Research Foundation in New York.

Refiners on the east coast of the US are significant importers of Nigerian crude oil, said Aaron Brady, senior oil analyst with Energy Security Analysis. Moreover, European countries import a lot of Nigerian crude to turn into diesel fuel, sending the excess petrol to the US, he said.

The New York Times

seattlepi.nwsource.com Saturday, March 22, 2003 SEATTLE POST-INTELLIGENCER NEWS SERVICES

OGBE-IJOH, Nigeria -- Exhausted, hungry villagers -- who were fleeing days of fighting in the oil-rich Niger Delta -- told yesterday of Nigerian soldiers and ethnic militants firing indiscriminately, leaving scores dead.

Meanwhile, officials signaled that the ethnic conflict could also threaten world oil supplies as the fighting has begun to limit oil shipments from the country, the fifth-largest exporter of oil to the United States in 2002, according to the Energy Information Administration.

Royal Dutch-Shell, the largest oil producer in Nigeria, invoked force majeure yesterday afternoon, effectively warning customers that events outside the company's control could delay oil deliveries by up to two weeks from its Bonny and Forcados terminals.

ChevronTexaco made a similar announcement Thursday, though the company did not specify the potential duration of delays.

Officials with both companies sought to play down the effect of the violence, but both have removed their employees from their facilities in the Niger Delta.

The fighting between Ijaw and Itsekiri tribes began March 12 and has since drawn in Nigerian military troops who, witnesses say, have launched retaliatory attacks against Ijaw villages in the swampy region.

Ijaw militants say 50 of their fighters were killed in fighting with soldiers in the village of Okorenkoko on Thursday. Ten soldiers were killed in an Ijaw ambush near the village of Oporoza, Nigerian newspapers reported yesterday.

Dozens of deaths have been reported in fighting elsewhere.

The fighting is taking place in a remote warren of creeks and swamps where roads and telephones are practically non-existent, despite the region's oil wealth.

The Niger Delta is the source of nearly all the 2 million barrels of oil Nigeria produces daily.

Some oil-industry analysts and traders cautioned that with so many problems bedeviling world oil markets, a prolonged reduction in Nigerian oil shipments could send prices higher once again.

"This has been building for months, but it has been tremendously overshadowed by events in Venezuela, then Iraq and the cold winter we've had," said John Kilduff, senior vice president of energy risk management at the New York office of Fimat USA, a unit of the French bank Societe Generale. "Nigeria is a key source of supply, and in this kind of situation, we need every barrel."

Nigerian military officials have denied attacking civilians, but as word of fighting spread, villagers were abandoning their communities as soon as they heard gunfire in the distance.

They fear a repeat of the military massacres in 1999 and 2001 that left hundreds of unarmed villagers dead. The conflict is rooted in a longstanding grievance by Ijaws, the region's largest ethnic group. They accuse President Olusegun Obasanjo's government of colluding with minority Itsekiris to draw up unfavorable voting boundaries before April elections. More than 10,000 people have been killed since Obasanjo's election in 1999.

New Nigerian violence closes key ChevronTexaco terminal

11:20 AM PST Friday 

ChevronTexaco Corp. is closing its 340,000 barrel-per-day Escravos terminal in Nigeria near the oil city of Warri after the country's military ordered the area evacuated in the wake of escalating violence that reportedly left at least 10 soldiers and scores of civilians dead.

A ChevronTexaco contract worker was killed earlier in the week.

Impending shutdown of the Escravos terminal raised growing fears of world oil shortages even as some 1.8 million barrels-per-day of Middle Eastern production was scuttled because of the U.S.-led war on Iraq. Venezuela, the U.S.'s fourth-largest supplier and the world's fifth-largest exporter, has yet to return to full production after an oilworkers' strike earlier this year.

Saudi Arabia is the U.S.'s largest source of foreign crude, followed by Canada, Mexico, Venezuela and Nigeria. Venezuela and Nigeria are members of OPEC, whose other members are said by industry analysts to lack sufficient surplus capacity to offset production losses from those nations and the Middle East.

San Ramon-based ChevronTexaco, Nigeria's third-largest foreign-equity producer, also declared force majeure on exports from Escravos, notifying purchasers that it may not be able to deliver March and April shipments. Oil traders said as many as 14 shipments scheduled for March and April could be affected.

Royal Dutch/Shell Group, which accounts for more than half of Nigeria's 2-million-bpd production, also was likely to declare force majeure, according to international media reports and the state-owned Nigerian National Petroleum Corp.

The Escravos terminal, which serves the oil-rich Niger delta fields in southern Nigeria, ships more than 13 percent of the oil that accounts for 95 percent of export income in Africa's most populous nation. Oil exports are the foundation of Nigeria's economy. ChevronTexaco and Shell have reported losses of 266,000 bpd since escalating violence between Ijaw and Itsekiri tribal fighters resulted in the Nigerian army ordering the area evacuated. In addition to tribal animosities, both groups are seeking greater concessions from foreign oil companies against the backdrop of national elections next month in which President Olusegun Obasanjo is seeking a second term. Some observers have described the violence nationwide as the worst since the Biafran civil war of the 1960s.

The Nigerian and Venezuelan cutbacks haven't had a direct effect on the East Bay's five refineries, whose major crude sources are Alaska and California's Central Valley fields. But they have helped drive up worldwide crude prices, which have led to soaring retail prices in the United States and the Bay Area, which now has the nation's highest pump rates for gasoline and diesel.