The paper said Nigeria could lose up to half of its production if a raging battle with ethnic Ijaw separatists persists.
The fact that the Nigeria-Sao Tome and Principe Joint Development Zone is far offshore has become a significant new factor in the value of its blocks and potential reserves.
ERHC Energy (OTC BB symbol: ERHE) has substantial equity in five of the blocks and rights to more in the offshore Sao Tome and Principe Exclusive Economic Zone, Its shares have soared as traders anticipate the signing of Production Sharing Contracts that would allow the company to exploit the reserves believed to await explorers in Blocks 2, 3, 4, 5 and 6.
ERHE's share price closed Tuesday at $0.78, down $0.011, on volume of 3,438,210 shares after trading as high as $0.87.
The extent of the production loss - 30 percent of its crude, Vanguard said - was far greater than earlier reported; Royal Dutch Shell has only cut 455,000 barrels a day, or 17.5 percent of what the paper says is the country's normal 2.6 million barrels a day, mostly as the result of attacks on a receiving terminal from Delta and offshore wells. Most observers say the country produces 2.4 million bpd.
It is unclear what other cuts may have contributed to the total reported by Vanguard, but if the number it reports is true the global ecnomy is far from having seen the worst of gas-pump shock. So far, the Nigerian production cutback has had no discernible impact on prices for gasoline in the United States.
It is not unusual, however, for Nigerian newspapers, even the best one, to exaggerate such figures in the interests of one politial goal or another.
Here is the Vanguard story:
Nigerian violence may delay OPEC cuts
...MEND to escalate state of insecurity
By Hector Igbikiowubo with Agency reports
Posted to the Web: Tuesday, February 28, 2006
VIOLENT unrest in Nigeria that has led to about 30 per cent cut in the country’s crude output could persuade OPEC to maintain its level of oil output at a near historic high when it meets next week, an energy analyst has said. There are also indications that the current state of insecurity in the Niger Delta may escalate further, shutting in at least half of Nigeria’s 2.6 million barrels per day capacity with implications for crude oil pricing.
Prior to violence breaking out last Thursday in Nigeria, Africa’s biggest producer of crude, analysts had predicted that the Organization of Petroleum Exporting Countries would cut output when it meets in Vienna at the start of March.
But Global Insight analyst Simon Wardell told AFP: “If the Nigerian situation means prices are US$60 to US$65 when they (OPEC) next meet, then again they’re going to have a really difficult time in cutting production back, so they’ll probably keep things steady.”
His comments were made as Nigerian separatist guerrillas taunted the army with claims of further attacks after a weekend of violence forced the energy giant Royal Dutch Shell PLC to slash the country’s oil exports by a fifth.
The news prompted oil prices to spike almost 3.0 per cent in London trading, as they struck an intra_day high of US$61.63 per barrel.
Trading in New York was suspended for a national holiday but was expected to open higher today. In London trading, the price of Brent North Sea crude for April delivery surged US$1.79 to US$61.54 per barrel in electronic deals.
The Nigerian insurgents said the military had abandoned one of its posts in waterways west of the oil city of Warri, allowing the militants to dynamite a floating barracks block and another of Shell’s crude oil pipelines.
Shell officials, however, said they had evacuated all oil plants in the immediate area, bringing Nigeria’s losses to around half a million barrels per day.
The global oil market currently has spare capacity of roughly 1.5 million barrels per day, according to market analysts. That would be insufficient to compensate for a loss of total production in Nigeria, which stood at some 2.4 million bpd in January.
Mr. Wardell added that in reaction to the Nigeria unrest, OPEC would prefer to cut production. “It all depends on the price, that’s what they’ll be reacting to.”
Kuwait’s energy minister, however, said yesterday that a cut in oil production may be necessary at OPEC’s next meeting since over_supply may reach two million barrels per day (bpd) in the second quarter.
“We believe the market is well_supplied and we believe the second quarter will be over_supplied ... with between 1_2 million bpd,” Sheikh Ahmad Fahd al_Sabah told reporters in his country’s parliament.
“We have to wait for our March meeting. If necessary and if prices will go back to be determined by supply and demand, we have to do our cut,” Sheikh Ahmad said. “But if prices continue as they are now we will continue to support stable prices for the future,” he added.
At its last meeting on Jan. 31, OPEC decided to keep its production ceiling of 28 million barrels per day.
The widely_expected move followed a 12% spike in the price of crude since the start of the year fuelled by controversy over Iran’s nuclear programme and a series of previous attacks against oil installations in Nigeria.
OPEC, which produces about 40% of the world’s crude, is actually producing more than 29 million barrels per day including output from Iraq, which is not included in the official quota.
While speaking exclusively with the Vanguard, a MEND spokesperson disclosed that government was taking their demands rather lightly and that there is the need to teach government a lesson in ‘quick response’.
“You are a media person, so I can't give you details. But I can let you know that we would no longer give any warnings regarding our actions. We shall go ahead and cripple oil activities in the Niger Delta before this time next month.
Our motive is to make the area unattractive to the multinationals. In no time we shall also take the fight to the streets of Port Harcourt, Warri and Yenagoa. Be rest assured that no oil installation in the Niger Delta can be safe from us neither shall any expatriate working in the area,” he said.
When reminded that their fight was with the government and not the multinationals, the MEND spokesperson countered, “these people are collaborators and we have given them a chance to exit the area. We shall not be held responsible for whatever happens to them.”
The spokesperson also served notice that as long as their demands are not met, more hostages would be taken.
The Niger Delta accounts for over 90 per cent of Nigeria’s crude oil export earnings resulting in revenues in excess of $400 billion in the last 50 years. However, the area is without basic infrastructures such as motorable roads, pipe-born water and electricity.