Originally created 06/02/04

Oil giants outside Middle East struggle to offset rising global crude prices



LAGOS, Nigeria -- Leading oil exporters outside the Middle East have pledged to boost production to offset soaring world prices - but it could be months or years before Russia, Nigeria and Mexico really manage to open their taps.

Those three nations are the world's Nos. 2, 7 and 9 oil exporters respectively, according to the U.S. Department of Energy.

Building projects to clear pipeline bottlenecks or boost production capacity are still works in progress in all three countries - or sometimes not even out of the talking stage.

In Nigeria, violent attacks on installations in the oil-rich Niger Delta have persistently limited drilling - forcing multinational giants to abandon some wells and pipeline stations entirely.

"On a longer term, at least one or two years, I think things will change - a big increase in production is possible," in those three nations, said Pieter Louw, a South Africa-based energy consultant.

"But in the short term, it's better to keep your little diesel car and don't expect big changes," Louw said. "Nothing faster than three months."

An al-Qaida-claimed attack at two Saudi oil industry compounds killed 22 people this weekend, heightening worries about the security of Saudi oil and making the timeline for other oil producing nations even more critical.

Most oil markets were closed Monday, but crude oil futures were up in Tokyo, indicating traders are concerned about the attack.

In Qatar, Oil Minister Abdullah bin Hamad al-Attiya said Monday that a "factor of fear" already had pushed up prices by $8 a barrel.

Visiting Moscow before the Saudi attacks, U.S. Energy Secretary Spencer Abraham said he was puzzled why the market hadn't already responded more favorably to the three nations' pledges of increased production.

"(Those pledges) should have a significant impact on world energy prices," Abraham insisted.

But the promises seem a long way from being met.

Mexico promised this month to do its part - but only by next year, when it has finished construction projects to boost capacity. Even then, the country's immediate output would swell by only 2- to 4 percent.

Nigeria promised an extra 300,000 barrels within 40 days, if the market wanted it. Industry analysts are skeptical, however, whether Nigeria - Africa's largest oil producer and the No. 5 source of U.S. oil imports - can go much beyond that modest target.

A member of the Organization of Petroleum Exporting Countries, Nigeria already is nearly 300,000 barrels over its daily export quota of 1.93 million barrels.

Crime and violence by ethnic militias vying for a share of Nigeria's oil wealth mean the country has little means to go much higher, the analysts say.

Armed attacks on installations and villages in the oil delta have cut about 7 percent of national production, in losses to Royal Dutch/Shell and ChevronTexaco alone.

Nigeria possibly could boost production to as much as 3 million barrels in a year - but at the risk of aggravating the violence already plaguing its oil producing region, economist Bismarck Rewane said in Lagos.

In Russia, pipelines and port bottlenecks are the problem. Oil exports sent through the state-owned Transneft pipeline already are running at near-maximum capacity.

President Vladimir Putin pushed for stepped-up efforts to widen trade routes during his state of the union address last week. But with several projects far from completion, industry experts agree any significant Russian oil export boost is at least three years away.

Saudi Arabia is the world's biggest oil exporter with about 8 million barrels a day. The kingdom has pledged to produce 9.1 million barrels in June - more than 10 percent of global crude supplies.