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Page last updated at 11:24 GMT, Wednesday, 21 May 2008 12:24 UK

Nigeria demands $2bn oil arrears

Children play on an abandoned Shell oil flow station in Nigeria
Militant attacks and strikes have pushed up oil prices

President Umaru Yar'Adua has ordered Nigeria's state-run oil company to demand nearly $2bn in arrears from two major oil companies.

The government say Royal Dutch Shell and ExxonMobil have not paid taxes and production sharing costs they owe on two offshore oil fields.

The companies say they have followed the law and are in discussions with the government.

Militant attacks and funding troubles have seen Nigeria cut its production.

"ExxonMobil affiliate fully complies with all laws and regulations and has paid taxes and royalties to Nigeria accordingly," AFP reported ExxonMobil responding.

"Our affiliate routinely has ongoing discussions with a number of government agencies on a variety of topics, including tax. We do not comment on ongoing discussions," it said.

Shell Nigeria Exploration and Production Company (Snepco) refused to comment while there were "ongoing discussions" between it and the government.

Contract negotiations

The Production Sharing Contracts agreed with the oil majors in the deep water production fields are coming up for renegotiation.

A BBC correspondent says the price of oil has rocketed since they were first negotiated and the government may be trying to improve their negotiation position.

At the same time, the Nigerian National Petroleum Company (NNPC) has not been able to fund its share of the joint venture agreements for on-shore oil production, and is trying to find other ways of paying for them, says the BBC's Alex Last in Lagos.

Militant idea

Militant attacks and strikes by Nigerian oil workers have helped push oil prices to record highs.

The defence ministry has suggested militant attacks could be brought under control by employing the very militants conducting the attacks to police the pipelines, newspaper This Day reported.

"We will engage them to police oil pipelines, but they must first form themselves into limited liability companies for us to discuss with them," Defence Minister Yayale Ahmed told a House of Representatives committee on Tuesday.

"That's a matter for the defence ministry to comment on," a spokesman for the oil company Royal Dutch Shell told the BBC.

A defence ministry spokesman was not available for comment.




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