Businesses which Promise a Boom with Increasing Oil Prices

All of us know the direct impact of increasing oil prices on various industries. Here I am putting a thought on industries/business that could prosper with increase in oil prices. Such areas include renewable source of energy, cars with dual fuel concept, other substitutes of petrol and many more.

Renewable Sources of Energy:

“High oil prices in the 1970s ended the era of crude oil as a source of electric power and kick-started the wind energy industry in Europe and elsewhere.”

“Germany is on track to provide wind power generation to 30 percent of the nation’s electrical needs by 2020 and the addition of solar and hydro energy will further increase their use of renewable resources and move toward energy independence.”

With oil prices touching $130 mark and some analyst predict the trend to hit $200 figure. The renewable sources of energy is the alternative source for energy production. Renewable source of energy include wind, small-hydel, solar, bio-mass or ethanol and geothermal.

Will the current regime of triple-digit crude oil prices begin the era of renewable energy? Conventional sources of energy, including oil and coal, not only have to bear the brunt of higher costs, they are also under attack by the green brigade. These hydrocarbon fuels are blamed for global warming and climate change. Internationally, a lot of investment is taking place in green fuels which are renewable and non-polluting. The momentum is the strongest in Europe and the fever is just catching up in India.

This is a suitable time for investors to start accumulating right stocks in this space. Given the size of the global energy market, the sky is the limit for companies which get it right.

Wind Power
Initiated by government subsidies, the growth in wind energy in India has primarily been driven by technological advancement and higher scale of operations.
And as technology improves, wind energy is becoming cost competitive vis-à-vis conventional sources. As per analyst “the best way to gain from growth in wind energy is to invest in equipment suppliers”. Companies like Suzlon Energyis are aggressively investing in technology and manufacturing capacity to emerge as one of the top global WTG suppliers.

Small Hydel
Hydro power is one of the oldest sources of renewable energy. But it has lost out to thermal power due to the cost, complexity and time involved in executing large projects. These require construction of huge dams and reservoirs, damaging environment and displacing people. This has created global interest in small projects, which are simpler to construct and do not damage ecology. Small rivers, rivulets and artificially-created storage dams or other small water bodies can be tapped to generate up to 20 mw power, which can be used locally.

Solar Power
According to studies, the earth receives more solar energy in just one hour than the world consumes in one year. Unfortunately, today, solar energy contributes only 0.1% of the world’s total energy needs. The key challenge in harnessing solar energy is the efficiency of technology and equipment. The technology in the sector is still evolving and nearly half a dozen technologies are vying for supremacy. While solar energy costs are declining, the costs of other sources of energy, including generation and distribution costs, are rising. Hence growth in solar energy sector is anticipated in the coming future.

Moser Baer has now ventured into the less capital-intensive and high-margin business of solar photo voltaic cells (PVC). With a strategy to offer multiple PV technologies, the company is aiming at bringing down PV electricity costs to match conventional energy price points. In the long run, it plans to set up the world’s largest thin film solar fabrication unit in India. Its PV business earned revenues of $43 million in FY08.

Biomass

Renewable energy can be extracted from biowaste arising from trees, crops and garbage. This energy is released either by burning biomass in a controlled environment or converting it to other usable forms of energy like methane gas, ethanol or bio-diesel.
The bagasse obtained as a by-product by the sugar companies is used to generate power, which is either consumed internally or sold commercially.

Dual Fuel Cars:-

The days of cars emitting harmful pollutants and consuming petroleum products might be over with global automobile manufacturers trying to usher in 'green cars' -- vehicles that have combustion engines integrated with electric-powered motors.

Tata Motors is developing an electric car, besides a host of eco-friendly, hybrid, bio-fuel and compressed-air run cars, said the Chairman, Mr Ratan Tata, at the annual general meeting on Thursday, 24th July 08.

"With the scourge of global warming hanging heavy over our heads, it is high time we switched over to battery-driven vehicles," Tara S Ganguly, Kolkata-based maker of Tara Tiny, a series of electric cars and two-wheelers. With fuel prices skyrocketing, it's high time consumers opted for electric-powered, hybrid or compressed-air runned vehicles.

Some 'green' cars have already hit the market, while others are in the pipeline. Few of these new breed of cars include:

-Nissan Pivo 2 concept car
-Chevy Volt
-Golfs from Volkswagen

Substitutes of petrol:-

With already a large investment in petroleum driven technologies, the complete shift from to non renewable sources of energy is going to take its time. Hence, going for other alternatives seems to be a smart move. Such options include use of ethanol as transport fuel, use of Jatropha or Tuba-Tuba seeds for transport fuel production.

Ethanol Production

As already discussed, ethanol can be used as a transport fuel. The bagasse obtained as a by-product by the sugar companies is used to generate power, which is either consumed internally or sold commercially.

In India, leading sugar companies like Bajaj Hindustan, Balrampur Chini and Bannari Amman are actively into co-generation of power and manufacture of ethanol. India’s largest sugar company, Bajaj Hindusthan,earns 15% of its revenues from nonsugar businesses like ethanol and power generation. It intends to earn 35-40% of its revenues from value-added and non-cyclical business. It expects exportable surplus from its co-generation units to cross 100 mw in the sugar season, which will start in November ’08. It generated around 80 mw a year ago. For Balrampur Chini, power co-generation contributes more than 15% to the company’s total revenues and is a major driver of profit growth. In view of the recent capacity expansions, the total saleable co-generation capacity stands at 126 mw.

Besides the co-generation of power, sugar company Bannari Ammanhas also ventured into wind power generation while de-risking its business model. Power generation contributes more than 20% to its total revenues. Equipment suppliers like Praj Industries, Triveni Engineering and Thermax are yet another set of companies associated with bio-mass energy. They are leading suppliers of equipment to companies in this sector. Praj Industriesis one of the largest suppliers of processes and systems to companies manufacturing ethanol, biodiesel and distillery industry. The ethanol business contributes 85% of the order book of the Rs 700-crore company. Praj is involved in R&D to make breakthrough cellulosic technology for ethanol. Triveni Engineeringmanufactures steam turbines, high speed gears and water & wastewater treatment equipment. It earns 40% of its revenues from its non-seasonal high-margin yielding business of steam turbines and co-generation of power.

Thermaxis a leading manufacturer of engineering equipment like boilers and heaters, absorption cooling, power and cogeneration systems and water and wastewater solutions among others. Around 80% of its revenue comes from its energy business.

Jatropha and Tuba-Tuba Plantation

The oil produced from seeds of plants like Jatropha and others can be used as a substitute of petrol.

Apart from reducing the nation's dependence on imported petroleum and other fossil fuels, massive planting of Jatropha have many more advantages. It will have a huge employment generation and job creation impact in the rural areas where poverty or unemployment is high, since crop establishment/care (first to second year) and harvesting of fruits of Jatropha is labor-intensive. Furthermore, it will have vast economic multiplier effects in the rural areas as it will mean high resource inflows. As an agribusiness venture, planting Jatropha will require mills to be constructed where the oil will be processed. Transporting the harvested fruits from the farms to the mills will need roads and bridges to be constructed and hauling trucks to be procured. It may signal the start of economic upliftment of the people in areas where it will be planted.

While planning for such massive plantation, care need to be taken that we are not moving towards food crisis or that we are not playing with economy.

As Jatropha can be grown on waste/barren lands and with agricultural dependent country like India adequate planning will lead for prosperous growth of villages and uniform economic development of nation as a whole.

Sources:
-Times of India
-rediff.com
-indiacar.net
-greencar.com
-relocalize.net

Dated: 29th July 08

Cargo Business – Sister Life Line for Airways

With a large no. of challenges in front of Aviation industry, the growing cargo sector would not only help to increase the profit of different airlines, it can also serve as a lifeline in times of crisis. As the oil prices continue to increase and are expected to even touch 200$/barrel mark, there is tough time ahead for airlines.

With supportive government policies and in a developing economy like India there is no stopping for cargo business. It is said that there is a room for every one in the cargo industry. Everyone from airline giants to small courier services corporate are looking to capitalize in this growing sector. More mergers and acquisitions are expected in near future.

The government recently allowed the foreign carriers to have a 74 per cent stake in Indian cargo carriers. A total of 49 per cent FDI was earlier allowed in the cargo sector, but no investment by a foreign airline was permitted. According to a recent CARE report, in India there are nearly 2,500 companies in this segment— the huge potential and demand looks tempting. According to analysts, the opening up of the Indian economy to foreign investments is expected to attract more companies into the country, thereby adding momentum to market growth.

As per industry estimates, the Indian express industry is valued at Rs 7,000 crore and is growing at approximately 25% annually. Asia will witness the highest growth rates and India will account for almost 9% of this annually, as compared to the world growth rate of 4%. And in this whole number maze, India emerges as a priority market.

Today, the domestic express makes up about 58% of the total market, of which a little less than half is in the organised sector. The unorganised and semi-organised segments, comprising largely of regional and intra-city service providers, and EMS Speed post, account for the rest. Blue Dart, one of the pioneers in the industry clocked a profit of Rs 69.93 crore after taxation for the year ended December 31, 2007, up by 39% from the corresponding period of the previous year. Though Blue Dart has no plans to partner with a foreign airline, the company feels that all major companies will be looking out for opportunities to acquire small domestic companies and enter into the sector.

FedEx in India has grown almost 5 times in past one decade.

DHL Express India holds a market share of 60% in terms of shipments and handles over 7.2 million shipments in 2007. As per industry estimates, the Indian express industry is valued at Rs 7,000 crore and is growing at approximately 25% annually.

Some News:

15th Jul 08: The man who revolutionised aviation in India with his low-cost airline, Air Deccan, is set for a new beginning in the cargo and logistics space. Capt G R Gopinath is planning to raise $50 million through private equity to part-fund his $200 million cargo venture.

28th may 2008: With petrol prices expected to cross $200 per barrel in the near future, Jet Airways chief Naresh Goel said the aviation industry was headed for a deep crisis due to price wars among airlines, at home and abroad.

12th May 2008: SpiceJet announced the launch of its cargo operations in the country. Initially, the service would cover eight major cities and would be expanded to all 18 destinations of the airline in the second quarter of the current fiscal.

5th Mar 2008: As part of its diversification plans, low-cost airline SpiceJet is aggressively looking at cargo business and has already started putting in place the necessary infrastructure.

8th Feb 08: UB Group promoted Kingfisher Airlines is planning to float its own dedicated cargo airline through a tie-up with a foreign carrier.

8th Feb 08: Full service carrier Jet Airways is also planning to launch its dedicated cargo operations through a tie-up with the German carrier Lufthansa.

How FMCG firms can Grow During High Inflation

Fast Moving Consumer Goods (FMCG), are products that are sold quickly at relatively low cost. Though the absolute profit made on FMCG products is relatively small, they generally sell in large quantities, so the cumulative profit on such products can be large. Examples of FMCG generally include a wide range of frequently purchased consumer products such as toiletries, soap, cosmetics, teeth cleaning products, shaving products and detergents, as well as other non-durables such as glassware, light bulbs, batteries, paper products and plastic goods. FMCG also include pharmaceuticals, consumer electronics, packaged food products and drinks. When inflation rises, prices of packaged consumer goods also rise.

Strategy for Large Industries:-

By large industry here it means having a large customer base and are widely spread throughout the nation. Like Bharti having a Mobile customer base of nearly 66.83 million subscribers.

When the consumers are in large number even a small margin will still yield to high profits. Hence instead of increasing the price of commodity in same proportion the industries can absorb a large portion of the cost escalation and passing down a small part of input cost rise to the consumer. For instance, vegetable oil prices have shot up by nearly 40% in the last one year, but Wipro Consumer Care has taken a price mark-up of just about 14%, that too in two phases. The rest of the raw material cost escalation has been absorbed by the company. Take another example. Parle Agro has managed to maintain the price of the oldest SKU (stock keeping unit), ie 200 ml, of Frooti and Appy, which has been selling at a maximum retail price of Rs 10 for almost 10 years.

By doing so the large corporates poses a stiff competition for other such industries, which in turn helps the consumer and the economy as well.

A certain amount of inflation can be absorbed as long as the market growth rate continues to be in double digits. The same may not be true if growth rate slows down. Companies too believe, that because of growing market the business that a company can generate in the next 1-2 years is more than what one could have generated over the last 5-10 years.

Strategy for Small Scale Industries:-

Here I am talking about Industries whose customer base in limited to a particular region. There customer base is limited. Its hard to survive for such industries when Inflation is high and there is neck to neck competition in market.

When prices of almost everything are going up, be it property, talent, transportation or even raw material. There are only two options before a small organization. Option one, to bear losses till the market stabilizes again and option two, to increase volumes to be able to absorb rising costs.

In first case industries starts cutting down on production to minimize losses. Which further throw the SSI out of the market.
For second case to be implemented government support plays an essential role. Govt. can impose more taxes on large industries or they can provide machinery and required technology in relatively cheaper rates. Or other such policies.

I had given a good amount of thought how small industries will survive in such a scenario, but was not able to come up with a strong idea. What I strongly feel SSI can survive with, supporting government policies and by the far sighted vision of the entrepreneur. One should give deep thought and an insight before starting a SSI, making the industry to be strong enough to survive any such fluctuation.

India Battling with Rising Fuel Prices

Dear reader although this topic require deep insight and intensive study of different policies of government and their impact, which I was not able to do due to lack of time. The will article serve as a basic block for further understanding of the issue. The information provided below is collected from various sources.

The Indian Government raised petrol prices by 11 per cent to stem losses, running at an estimated $137 million a day, suffered by the country's state-owned petrol companies. The price of diesel was increased by 9per cent and cooking gas 17 per cent.
Interestingly the move shows a mixed response Economists as few says that the move was much needed and necessary for economy. How is it so, is discussed in subsequent paragraphs. Other says that the move could derail economic growth in the region, stoke inflation and influence Indian elections.

Manmohan Singh, the Indian Prime Minister, said the move was inevitable: “Our oil companies cannot go on incurring losses. They will have no money to import crude oil from abroad.”

The oil companies of India have reported Rs 77,000 crores under realisation due to subsidy on oil of which Rs 33,500 crores were taken by the government in the form of oil bonds and the rest amount of Rs 43,500 crores was taken as loss in the balance sheet of PSU oil companies. Had the oil companies being owned by private sectors, either that would have closed down or people would have been purchasing the oil at cost more than three times the present level. It has already happened when Reliance was not able to sell the petrol and diesel at the price equal to PSU companies, it closed several of its retail outlets of petroleum products in the country.

There is popular support for policies to minimize fuel prices by subsidies or reduced taxes. But price-minimization policies are likely to harm consumers and the economy overall by increasing total fuel consumption and vehicle travel, and associated costs such as traffic and parking congestion, infrastructure costs, traffic crashes, import costs and pollution emissions. Fuel price reductions are an inappropriate way to provide more affordable mobility for low-income households, other strategies can help them more while also increasing transport system efficiency.

Subsidy In India

The Indian government provide subsidy to control oil prices in the country. The subsidy is massive - hidden by a disingenuous device called oil bonds. Here are some rock solid facts. IOC, HPCL and BPCL are currently losing $137 million a day (i.e., Rs 582 crore per day at Rs 42.50 = $1). They lose Rs 16.34 for each litre of petrol, and Rs 23.49 for each litre of diesel sold in Delhi.

Union Finance ministry has allowed the oil companies to issue oil bonds to meet losses. But according to the officials of ministry, before issuing oil bonds there is need to increase domestic prices of crude oil but this is not the condition before issuing the bonds.

It is a well-known fact that to neutralise subsidy burden on the oil importing companies, government is issuing the oil bonds, which the PSU banks and LIC are forced to subscribe. If yields on these bonds go down, banks succumb to losses, which they try to recover by increasing price of its services as well as increasing interest rate.

Fuel Prices in few of the other countries(as on 3rd June 08)
Turkey: Rs 113.30 per litre
Norway (Oslo): Rs 112 per litre
United Kingdom: Rs 95.50 per litre
Hong Kong: Rs 84.10 per litre
Brazil (Sao Paolo): Rs 66 per litre
Canada: Rs 57 per litre
Pakistan: Rs 44.80 per litre
The United States: Rs 44.25 per litre
Russia (Moscow): Rs 42.275 per litre
China: Rs 31.30 per litre
Malaysia (Kuala Lumpur): Rs 25.40 per litre
United Arab Emirates: Rs 15.65 per litre
Saudi Arabia (Riyadh): Rs 5 per litre
Venezuela (Caracas): Rs 2.12 per litre

TATA Acquires JLR – Preparing Itself for Economic Challenges

Tata Motors today acquired the Jaguar Land Rover businesses from Ford Motor Company for a net consideration of US $2.3 billion, as announced on March 26, in an all-cash transaction. As part of the transaction, Ford will continue to supply Jaguar Land Rover for differing periods with powertrains, stampings and other vehicle components, in addition to a variety of technologies, such as environmental and platform technologies. Ford also has committed to provide engineering support, including research and development, plus information technology, accounting and other services.


It is been predicted that the automobile industry including Tata Motors is expected to face challenging times ahead due to unprecedented increase in input prices and continuing adverse economic situation in India and globally. Today on 2nd June, Tata Motors announced an increase in the prices of its passenger vehicles from 1 to 3%, because of increasing prices of inputs.

TATA is preparing itself for the tough time ahead. This year the Company marked with two path breaking events - the unveiling of the Tata Nano - the world’s least expensive car and the signing of the definitive agreement with Ford Motor Company for purchase of the Jaguar and Land Rover businesses.

Making itself ready for the future challenges, Tata Motors’ come up with a new plant at Pant Nagar (in Uttarakhand) for Ace and Magic range of vehicles during 2007-08, construction activity is on at Singur (in West Bengal) for the Tata Nano and at Dharwad (in Karnataka) for buses to be manufactured by the Company’s joint venture, Tata Marcopolo Motors Limited. The existing plants at Pune, Jamshedpur and Lucknow are undergoing expansion and modernization. Also TATA plans to launch a number of new products towards the end of the year, in both the ranges - passenger vehicles as well as Commercial vehicles.

Dated: 3rd June 2008

Increase in Rubber Prices

Rubber prices hit an all-time high of Rs 13,500 per quintal at Kottayam spot market in Kerala following a rise in crude oil prices and firm global market. Production in 2007-08 fell to 825,000 tonnes from 853,000 tonnes in the previous year, chiefly because of heavy rains in Kerala, a key rubber producing state, and a viral fever that kept tappers away from work for more than a month.

Production of rubber in India
Kanyakumari in Tamil Nadu
Districts of Kerala.
Coastal regions of Karnataka
Goa
Andhra Pradesh
Orissa
Some areas of Maharashtra
Northeastern states (mainly Tripura)
Andaman and Nicobar Islands

Use of Rubber
The use of rubber is widespread, ranging from household to industrial products, entering the production stream at the intermediate stage or as final products. Tires and tubes are the largest consumers of rubber. accounting for around 56% total consumption in 2005. The remaining 44% are taken up by the general rubber goods (GRG) sector, which includes all products except tires and tubes.
Other significant uses of rubber are door and window profiles, hoses, belts, matting, flooring and dampeners. Gloves (medical, household and industrial) are also large consumers of rubber and toy balloons. Significant tonnage of rubber is used as adhesives in many manufacturing industries and products, although the two most noticeable are the paper and the carpet industry. Rubber is also commonly used to make rubber bands and pencil erasers.
Additionally, rubber produced as a fiber sometimes called elastic, has significant value for use in the textile industry.

Impact on Rubber Industry
The continued rise in the prices of natural rubber in the current financial year has set the Rs 19,000-crore tyre industry behind by almost Rs 1,000 crore. Combine this with tyre manufacturers' inability to pass on the increased cost to the consumers in view of the increased competition and it's double whammy for the tyre industry. According to Automotive Tyre Manufacturers Association (ATMA) the natural rubber (RSS-4) price that ruled at Rs 103 a kg at the beginning of the new financial year is currently hovering around Rs 120 a kg. This means a rise of Re 1 a kg every second day.
Figures released by the Rubber Board show tyre industry's consumption of natural rubber at 4.91 lakh MT. Back of the envelope calculation will show that every one rupee increase in natural rubber cost is adding an incremental cost of Rs 49 crore on the industry.
Natural rubber itself accounts for 42 per cent cost of raw material cost of the industry. The other raw materials are crude and steel based and both are facing inflationary pressures adding to the agony of the tyre industry.

Future Trend for Rubber Prices
The price of rubber is likely to increase further due to the shortage of the commodity and the upwrd trend in the price at international market, according to traders. The shortage in production was due to unfavourable climatic conditions and the unseasonal rains for the past couple of months.The fall in production was to the extent of 60% on an average and there is substantial loss in tapping days due to rain, traders said. If India plans to increase its rubber production in its costal areas, than the economic status of farmers is for sure going to improve.

Dated: 28th May 2008

Reliance Globalcomm Advances In Global Market

Reliance Globalcomm is a 100% subsidiary of Reliance Communications. Recent advances of Reliance Globalcomm like acquiring U.K. based VANCO Group and with talks going with MTN Group clearly indicates the Anil Ambani’s vision of creating a global customer base in telecommunication market. With the advancement in Communication domain and coming up of new Wireless technologies, becoming global is a much needed step for survival in this competitive market. Lets take an overview on recent activities of Reliance Communications.

Reliance Globalcom acquires U.K. based Global Managed Network Services provider VANCO Group Limited

May 26th 2008: Reliance Globalcom Limited, subsidiary of India’s largest integrated telecom Service provider Reliance Communications, today announced signing of an agreement to acquire the London headquartered pioneering Global Managed Network Services, VANCO Group Limited through one of its wholly-owned subsidiary. The acquisition of VANCO would add $365 Million (Rs. 1,550 crore) to the annual revenue of Reliance Globalcom through secure Long-term contracts with largest enterprise customers.

VANCO is recognised by Gartner to be amongst world’s top 5 Managed Global Network players with over 220 MNC customers. Its blue chip customer base includes AVIS, British Airways, Siemens, Virgin Megastores. VANCO increases the Reliance Globalcom’s tally of enterprise customers to over 1,400. VANCO has been rated as Worlds “Best Network Service Provider” for three years in a row since 2005. VANCO Managed Network services are currently available in over 40,000 locations across 163 countries.

Reliance Communications and MTN GROUP to enter into exclusive negotiations

Reliance Communications and MTN Group, a leading emerging market telecom operator, have agreed to enter into exclusive negotiations for a period of up to 45 days with respect to a potential combination of their businesses.

Reliance Communications and Alcatel - Lucent forms Joint Venture

Mumbai, May 12th 2008 - Reliance Communications and Alcatel-Lucent (Euronext Paris and NYSE: ALU) today announced forming a global joint venture. Combining the unique strengths of Alcatel-Lucent and Reliance Communications, the Joint Venture Company would foray in the fast growing $ 16 Bn (Rs. 64,000 Crore) Managed Network Services Industry and will cater to telecom operators, both CDMA and GSM, across the globe.

Reliance Communications forays in International Mobile market with GSM License in Uganda.

21 February 2008: Reliance Communications Limited today announced acquisition of Uganda based Anupam Global Soft (U) Ltd, a company holding Public Infrastructure Provider License (PIPL) and Public Service Provider License (PSPL) issued by Uganda Communications Commission. The acquisition, made through a subsidiary of Reliance Communications Limited, marks the first step in the Company’s plans in the International Mobile market.

Reliance recently acquired eWave World, a 4G operator focused on emerging markets across Asia, Latin America, Western Europe and Africa. Last year

Reliance Globalcom had acquired a world leading US based Ethernet Service provider, Yipes Holding Inc. for $ 300 Mn (Rs. 1200 cr) in 2007.

Dated : 27th May 2008

Effect of Nigeria Militancy on Oil Prices

Apart from problems with much talked oil producers Iraq and Iran, the militancy problem in Nigeria is also accounting its share, although little, in the current increase in oil prices. The current article will give an overview of Nigeria’s oil strength and its current status.

Nigeria is the largest oil producer in Africa, the eleventh largest producer of crude oil in the world and a member of the Organization of Petroleum Exporting Countries (OPEC). According to Oil and Gas Journal (OGJ), Nigeria had 36.2 billion barrels of proven oil reserves as of January 2007. The majority of reserves are found along the country's Niger River Delta, in southern Nigeria and offshore in the Bight of Benin, Gulf of Guinea and Bight of Bonny. Nigeria has total production capacity (total potential production capacity if all oil currently shut-in came back online) of three million barrels per day.

Nigeria is the world’s eighth largest exporter of crude oil and the country is a major oil exporter to the United States. In 2006, Nigeria’s total oil exports reached an estimated 2.15 million bbl/d. Nigeria shipped approximately one million bbl/d or 42 percent of its crude exports to the United States in 2006. Additional importers of Nigerian crude oil include Europe (19 percent), South America (7.6 percent), Asia and the Caribbean.

Since December 2005, Nigeria has experienced increased pipeline vandalism, kidnappings, and militant takeover of oil facilities in the Niger Delta. As of April 2007, an estimated 587,000 bbl/d of crude production is shut-in. The militant activity in the Niger Delta (especially near Warri and Port Harcourt) has severely impacted Nigeria’s oil production potential by shutting-in an estimated 20 percent of total production.
As per a report – “Violence in the Niger Delta has reduced Nigeria's total oil production by a quarter in the past two years”.

With the help of new projects coming online, the Nigerian government hopes to increase oil production capacity to four million bbl/d by 2010. The Nigerian Government is also talking steps to curb militancy, but right now nothing could be said in such a volatile situation, lets hope for some good results in the coming future.

Dated : 23rd May 08