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Oil Standoff Continues in Nigeria


Armed protesters are occupying an oil production facility operated by an Italian oil company in Southern Nigeria, a day after they shut down the facility. The daily production of 55,000 barrels of oil has been disrupted following the attack.

Nigerian officials say they have made contact with armed protesters who occupy a flow station operated by Italian oil company Agip in the southern Bayelsa state.

About 48 people, all local staff members, were seized by the attackers.

The attack may be in response to the alleged refusal of the oil company to honor a previous agreement between Agip and the local community. Company officials say talks are under way to get the invaders to vacate the platform.

It is the second time in recent days that an Agip facility in the Niger Delta was attacked. On Thursday gunmen kidnapped a Briton and an American working for a Norwegian company in the region. The two men were released late Tuesday.

Angry villagers demanding the provision of amenities and jobs stormed three oil platforms run by Shell oil company last week. The protesters occupied the facility for six days.

Nigeria's oil production is down by about 500,000 barrels per day since February when militants increased their attacks on the oil industry.

With crucial elections billed for next year, analysts predict an upsurge in Niger Delta violence. That could have grave implications for the Nigerian economy that depends substantially on oil revenues.

Economics Professor Mike Obadan, of Nigeria's University of Benin, says the prospects are grim for the Nigerian economy.

"In the budget statement for 2007 read by President Olusegun Obasanjo last month, he did spell out the effect which disruption in oil production in the first quarter had on government business," Obadan said. "It was pointed out that the country in the last quarter lost an average of 600,000 barrels per day as a result of the escalation of violence and 600,000 barrels of oil per day at a price of, say, $60 (a barrel) is a substantial amount of money. And that one had immediate impact on certain aspects of budget implementation. I will give you an example. Because of that, government was not able to find the resources to meet the provision of subsidy for petroleum products."

Earlier, U.S. diplomats issued a warning that a militant group is planning to launch attacks on oil facilities and kidnappings in the first week of November.

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