Attack on Pipeline Further Strains Nigeria

ABUJA, Nigeria (THE WALL STREET JOURNAL), Jan. 11, 2010

An attack on a crude-oil pipeline operated by U.S. oil giant Chevron Corp. is the latest in a series of political and security setbacks for this embattled West African nation.

On Friday, unknown gunmen attacked Chevron's Makaraba-Utonana pipeline in Delta state in southwestern Nigeria, said a person in the industry familiar with the situation. The attack forced the company to cut its production by 20,000 barrels a day, a Chevron spokesman said. The spokesman said Chevron was "assessing the situation" and that it is "committed to the safety and security of its employees and the protection of the environment in all its operations."

The Nigerian military Joint Task Force, which patrols the Niger Delta, said the task force and Chevron "have confirmed that indeed there was sabotage at a Chevron pipeline between Makaraba and Otunana," which it called an isolated incident.

The attack could threaten an amnesty deal for militants that bound the government and Nigerian militants in a shaky four-month cease-fire. In October, thousands of suspected militants turned in their weapons to avoid arrest. During that time, Western oil companies, including Chevron, Exxon Mobil Corp. and Royal Dutch Shell PLC, were able to increase Nigeria's oil production to almost two million barrels a day from about 1.6 million barrels.

Friday's pipeline assault is the latest blow for Nigeria, Africa's most populous country and a fragile regional power now grappling with an assortment of security challenges.

The country has come under intense scrutiny by the U.S. and other governments following an attempted bombing of a Detroit-bound plane on Christmas Day, allegedly by Nigerian citizen Umar Farouk Abdulmutallab. Mr. Abdulmutallab has pleaded not guilty to six charges.

Last week, the U.S. Transportation Security Administration placed Nigeria on a list of 14 countries whose passengers will undergo increased security checks upon entering the U.S.

Nigeria is scrambling to limit diplomatic damage from the attack. It has ordered 10 full-body scanners for use at its four international airports, according to a government official. Four scanners donated by the U.S. government in 2007, originally meant only for use in antidrug-trafficking work, are already in the process of being installed for general passenger use, the official said.

The security troubles have hit Nigeria at a politically delicate time. Nigerian President Umaru Yar'Adua has been absent from the country for more than six weeks, receiving medical treatment in Saudi Arabia for a heart condition. Government officials have said the president remains healthy enough to govern the country.

Still, the Nigerian president's absence has sparked concern among those investing in the oil-rich but volatile Niger Delta. Chevron is currently in negotiations with the government to renew several expiring oil leases. President Yar'Adua's absence forced a halt to the negotiations, a Chevron executive said in an earlier interview. Shell is also working to renew expiring oil licenses. ExxonMobil signed a deal for three expiring leases in December for another 20 years with an option to renew.

A separate incident occurred at a Chevron facility near the pipeline attack on Jan. 4. Nigerian soldiers shot and killed two contract workers and injured four others at a Chevron gas project when a skirmish erupted after the soldiers blocked workers from entering the property.

Since 2006, armed militants have frequently disrupted oil production and kidnapped more than 200 foreign oil workers in the Niger Delta region, where hundreds of oil pipelines crisscross each other through mangrove-lined creeks.

Copyright (c) 2010 Dow Jones & Company, Inc.

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