Giant US oil firm ChevronTexaco is to change the way it distributes aid in Nigeria amid fears the present system is stoking conflict.
Nigeria's main oil-producing areas are racked by political tension
Its review of its Nigerian aid programme found it was proving "inadequate, expensive and divisive".
It found that handing funding directly to communities near oil installations was fuelling local tensions and creating opportunities for corruption.
Over the past decade, the firm has donated $129m (£69m) in aid in Nigeria.
The rivalries created by the system of dishing out aid at village level was "inadvertently leading to or adding to the causes of conflicts among communities", the report found.
In future, ChevronTexaco is to put more emphasis on working with regional councils to devise projects locals want.
The firm has published its findings in Nigerian newspapers.
"Violent, incessant inter-and-intra ethnic conflicts have left many of the development projects funded by the company destroyed, not to count the many lives and property lost," Reuters reported the company's statement as saying.
Problems uncovered included the theft of funds by corrupt local officials, who often used the money to fund gangsterism rather than to provide healthcare or create jobs.
ChevronTexaco's findings echo those of another major foreign oil firm operating in Nigeria, Royal Dutch Shell.
Shell concluded that it was inadvertently contributing to the problem it was trying to solve, and it decided to phase out cash aid.
ChevronTexaco lists Nigeria as one of its major production centres.
The oil firm's 2004 Nigerian output averaged 117,000 barrels a day of crude oil, but unrest has hampered production.
Its output in the country's southern Niger River delta region has been hit hard by riots and ethnic unrest since the run-up to the 2003 presidential election.
Protestors have targeted foreign oil firms, saying they have failed to bring jobs for locals.
Damage to the firm's operations in the Warri region was "extreme and beyond belief" and could cost more than $500,000 to put right, according to the firm's statement.
In December 2004, villagers in the Delta region temporarily occupied three foreign-owned installations - two run by Shell, and the Robert-Kiri flow station, run by ChevronTexaco.
ChevronTexaco's major projects in Nigeria include the giant Escravos Gas Project and the Agbami deepwater oil field - the country's biggest deepwater find with reserves of 800 million barrels of oil equivalent.
ChevronTexaco has more than 2,000 staff in Nigeria, of whom 90% are Nigerian, according to the company's website.
It operates in 180 countries and has 47,000 staff worldwide.