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Nigerian oil output falls by a quarter

Oil output in Nigeria has plunged by a quarter since the start of last year in the face of political unrest in the Niger Delta, reducing the country's influence in OPEC and limiting the effectiveness of OPEC itself.

Nigeria, Africa's biggest producer, accounted for a daily output of 2.6 barrels at peak production, but violence in the oil-producing south has reduced the figure by a quarter since January last year.

More than 200 foreigners, mostly in the oil industry, have been kidnapped and later released by militants seeking a larger share of the region's oil wealth for the local people.

"The most dangerous areas have been abandoned by oil company operators," Francis Perrin of the publication Arab Oil and Gas said.

Despite the election of new President Umaru Yar'Adua in April, "we don't have the impression the government has the means to find a lasting solution," Perrin said.

The International Energy Agency estimated that without the unrest, Nigerian daily output would come to more than 3 million barrels.

But the agency has also said that Nigeria's less vulnerable offshore production is gaining momentum, now generating 900,000 barrels a day but with the capacity to eventually add 500,000 barrels.

The government's overall output target is 4 million barrels a day by 2010.

But at the moment, the paralysis afflicting oil operations in the Niger Delta is affecting the production capacity of OPEC, in which Nigeria is now the sixth-largest exporter. Under normal conditions it would be the third-largest.

At a time when oil demand is soaring, OPEC production is also hampered by instability in Iraq.

"If Iraq were capable of producing at its pre-war level and if there were a return to security in Nigeria, we would have an extra 1.0 million barrels a day on the market, which would ease pressure on prices," Terzian said.

In Nigeria, attacks -- such as the one in which gunmen killed one foreign oil worker and kidnapped two others in a raid on Thursday on a compound belonging to Italian oil company Saipem -- have helped push oil prices above US$80 a barrel.

Since OPEC's last meeting on Sept. 11, oil prices have rocketed to record highs with New York crude rising to more than US$84 per barrel. Prices have now surged by about 30 percent in the past year due to tight supplies of world energy.

But the weak US dollar is slashing the value of oil revenue for the biggest crude producers, leading analysts to predict that OPEC will not rush to hike output again despite tight world energy supplies.

"The dollar has been devalued significantly over the last few months and that has really affected the income to a number of countries," Iraqi Oil Minister Hussein Chahristani said earlier this month.

The weak US currency makes dollar-denominated commodities, like crude oil, cheaper for buyers with stronger currencies and therefore encourages demand. That helps to offset record high prices for oil in nominal terms on world markets.
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