Nigeria eyes 500,000 bpd rise in oil output by July

LAGOS, Oct 4 (Reuters) Nigerian oil output could rise by 500,000 barrels a day by July 2008 if security in the Niger Delta continues to improve and a new offshore field starts on time, industry sources said on Thursday.

The anticipated recovery in supply from Africa's top oil producer follows almost two years of declining or stagnant exports due to militant attacks that closed a fifth of capacity in Feb.

2006, fuelling a global oil price rally.

Workers are slowly returning to the Forcados and EA oilfields closed by those attacks, and operator Royal Dutch Shell has already restored about 65,000 barrels per day (bpd) of the 477,000 bpd output lost in the western Niger Delta.

The company hopes to see another 270,000 bpd from Forcados and EA by July next year, a senior industry source said.

''That will be possible if the security environment is stable,'' the source said, asking not to be named.

Agbami, a new offshore oilfield operated by Chevron, is expected to add another 230,000 bpd from June.

Nigeria pumped a total of 2.16 million barrels per day (bpd) of crude oil in September, down from 2.46 million at the end of 2005 before the latest phase of disruption began, according to the Reuters monthly OPEC output survey.

If things go to plan, crude supply could reach 2.66 million bpd by the start of the third quarter.

The Energy Ministry was not immediately available to comment. In the draft budget for 2008, the government has used an average oil production of 2.44 million bpd for the year.

OPEC The recovery should provide a windfall for the treasury, but will also present a challenge to the Organization of the Petroleum Exporting Countries (OPEC), which has set a 2.16 million bpd supply limit for Nigeria from November.

Western companies producing Nigerian oil will face much tougher restrictions if the government decides to comply with its quota.

Another downside risk for production would be any government enforcement of a January 2008 deadline to eliminate gas flaring.

Security has improved in Nigeria's southern oil producing region since the inauguration of President Umaru Yar'Adua in May, when militant groups began a ceasefire to allow for talks with the new government.

However, one prominent armed group, the Movement for the Emancipation of the Niger Delta, has threatened to call off the truce over the arrest of one of its leaders last month.

Gunmen killed a Colombian contractor and kidnapped two other foreigners from an industry yard in Port Harcourt in the eastern delta after the threat last month.

But violence in the western delta, where most of Shell's closed oilfields are located, has dropped sharply.

From 65,000 bpd today, Shell is expected to raise its supply to the Forcados export terminal in Delta state by about 90,000 bpd in December and another 70,000 bpd in July, the senior industry source said.

The company has also begun daily helicopter flights to its 115,000 bpd EA field off the coast of neighbouring Bayelsa state, and this is now expected to return by mid-year, he added.

A Shell spokesman declined to give details of the company's recovery programme.

Agbami's huge floating production facility left South Korea last week and is due to arrive off the Nigerian coast before Christmas in time for a June start-up, other sources said.

Both offshore fields could take several weeks to attain full production.

Nigerian exports will jump again in December 2008 with first oil from Total's 180,000 bpd Akpo field, although this light-density condensate does not count towards Nigeria's crude oil supply limit under OPEC rules.

Following is a table of expected new oil, NGL and condensate fields in Nigeria. Volumes are net anticipated increase. Based on information from the operating companies, industry sources and analysts.

OPERATOR GRADE START DATE VOLUME TERMINAL Shell Forcados Dec 2007 90,000 bpd Forcados Chevron Agbami June 2008 230,000 bpd FPSO Shell Forcados July 2008 70,000 bpd Forcados Shell EA July 2008 115,000 bpd FPSO Total Akpo Dec 2008 180,000 bpd FPSO REUTERS KR RK1930