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Analysis: Nigerian oil reserves drying up?

Nigeria's oil resources are being depleted by more than 2 percent a year, according to official estimates of the total known reserves both on and offshore.
by Carmen Gentile
Washington DC (UPI) Dec 18, 2008
Nigeria's oil reserves could dry up in the next 50 years, according to energy officials for Africa's largest oil producer, citing a downward trend in production over the last five years. Many attribute the decline to ongoing violence, not depleted resources.

The director of Nigeria's Department of Petroleum Resources, Aliyu Sabonbirni, said both the violence in the oil-rich Niger Delta and poor performances by joint ventures comprising Nigerian and foreign oil companies have caused the country's oil output to shrink dramatically over the last three years. He predicted the West African nation will be pumped dry in less than five decades.

An "investigation conducted on the reserves situation from 2002 to 2007 revealed a downward trend in the oil reserves in most of the JV (joint venture) companies, which accounted for 70 percent of our nation's reserves," Sabonbirni said.

Nigeria's oil resources are being depleted by more than 2 percent a year, according to official estimates of the total known reserves both on and offshore, according to the director, Nigeria's Guardian newspaper reported Wednesday.

As of Jan. 1, 2008, Nigeria's "proven plus probable oil reserves" was 32.93 billion barrels, he said, noting that annual production is estimated at 731 million barrels.

Decreasing production of Nigeria's No. 1 export -- which accounts for about 95 percent of the country's federal revenue -- also has prompted leaders to slash the country's federal budget.

Though mostly blamed on violence by armed militant groups in the Niger Delta, the production decrease means the country faces serious budget cuts in the coming year, Nigerian Finance Minister Shamsuddeen Usman said recently.

"There have been a number of very serious measures taken to reduce expenditure," said Usman, declining to detail where the budget cuts would be made.

Original budget plans for 2009 assumed a minimum oil price of $62 a barrel and a production level of more than 2.3 million barrels a day.

However, with oil prices dropping well below that from a high of $140 or more a barrel in August, Nigeria is faced with yet another impediment to alleviating the country's chronic poverty that many blame for the upswing of violence in the delta.

Since the 1970s, Nigeria, Africa's No. 1 oil producer, has pumped more than $300 billion worth of crude from the southern delta states, according to estimates. But high unemployment in the delta, environmental degradation due to oil and gas extraction, and a lack of basic resources such as fresh water and electricity have angered some of the region's youth and incited them to take up arms.

A culture of discontentment with the Nigerian government and the foreign oil companies doing business there pervades the delta, as the region's oil and gas wealth rarely trickles down to the region's inhabitants, said Frank Verrastro, senior fellow and director of the Center for Strategic and International Studies' Energy and National Security Program.

"Delta residents see this wealth being exported, and it infuriates them," Verrastro told United Press International.

"There is a way of dealing with the local population, but it takes a concerted effort by investors, the militants and government in power to be committed to the same objective," he said, referring to the development of the delta, the stamping out of corruption in both the private and public sectors, as well as bringing an end to the militant attacks that have caused oil production to drop 20 percent in the last few years.

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