Barnaby Phillips: An ambitious plan to reactivate Nigeria's energy industry

The company said it planned to invest $8.5bn over the next five years. If the venture goes ahead, it would revitalise Nigeria's energy industry and give Shell's operations in the country an enormous boost.

Ronald van den Berg, chairman of Shell's Nigerian subsidiary, said Shell and its partners would bear around 70% of the costs while the Nigerian government would have to provide the rest.

Shell's new oil facilities could produce around 600,000 barrels a day

Shell already produces about half of Nigeria's daily output of two million barrels of oil. New discoveries of oil reserves, and the prospect of Nigeria's virtually untapped vast natural gas resources, have encouraged the company to embark on a massive expansion plan.

A string of financial disputes with the Nigerian government and the global fall in oil prices could have dissuaded Shell from committing such large sums of money.

However, the fact that the new oil fields are based off-shore will have eased Shell's decision. During recent years international oil companies in Nigeria were badly affected by political unrest.

Part of the attraction of the new oil discoveries is that they have all been off-shore and are therefore much less prone to the disruption which has severely affected output in the Niger delta.

Shell in Nigeria

Shell hopes that its investment will be seen as a gesture of confidence in the current transition programme from military to civilian rule.

Shell's operations in the Niger delta have been troubled by accusations of environmental pollution

It also intends to show that it has not been deterred by the unrest in the delta, where local communities demanding a greater share of oil wealth launched a series of attacks on oil installations and workers.

The plan will rely on the co-operation of several other multi-national companies who are involved in joint production ventures with Shell. The Nigerian government, which has not committed itself to the proposals, would be expected to make an investment of over $2bn during the next five years if they went ahead.

In recent years, oil companies have accused successive Nigerian governments of not meeting their commitments to invest in the industry, but Shell estimates that this plan would earn the Nigerian government about $20bn over the next 25 years.