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Energy & Resources
Nigerian oil crisis
Mineral resource of the month: Lithium


Nigerian oil crisis

Nigerian militants have figured out something: When they threaten or disrupt oil production in Africa’s largest oil producer, the world pays attention, giving them a greater likelihood of getting what they want, or at least bringing negotiators to the table. As such, attacks against multinational oil companies and their infrastructures have increased over the last year, each time causing a spike in world oil prices.

This situation is hardly new, however, says Monica Enfield, manager of the country strategies group with PFC Energy, an energy consulting firm in Washington, D.C. Although the unrest seems to have increased lately, the apparent magnification is due more to “an attentive media and a world fixated on high [oil] prices and globally tight markets” than to an actual escalation in activities, she says.

Since Nigeria gained independence from the United Kingdom in 1960, “there have been specific periods of unrest,” Enfield says, largely caused by “a chronic problem of accessing resources and sharing profits.” Most of the country’s oil is concentrated in the poor and undeveloped delta region in the south, while the power and money is concentrated in the north.

“The problem is that residents of the delta haven’t seen any benefits from the billions of dollars of oil profits,” says Elias Johnson, a spokesman for the U.S. Energy Information Administration (EIA). They’re demanding greater sovereignty over the oil developments in the region, he says.

Nigeria is Africa’s most populous country, and could be one of the continent’s richest, considering it holds at least 36 billion barrels of proved reserves of light, sweet (and highly desirable) crude oil, as well as at least 185 trillion cubic feet of natural gas, the seventh largest concentration in the world, according to EIA.

Nigeria produces about 2.5 million barrels of oil per day, much of which goes to European and American markets, according to EIA. Nigeria is one of the top five exporters to the United States. And the country expects to be producing up to 3 million barrels per day this year, and to 4 million barrels per day by 2010. In addition to the known fields on the delta and just offshore, far more oil and natural gas could exist offshore in deepwater fields, which are drawing increasing attention from oil companies.

With that increased interest, however, has come increased exposure to danger. Pipeline sabotage, for example, has been rampant recently, including a sabotage-induced fire last October that killed 60 locals and another one in May that killed some 200 locals. And since January, several attacks on a pipeline have led Shell to shut down production of 455,000 barrels per day. When Geotimes went to press, that oil remained shut in.

Multinational companies have also seen an increase in kidnappings of foreign workers; some workers have been released, while others have been murdered. Oil companies have stated that their employees are the first priority and that they will shut down operations as necessary if they feel that their workers are in danger, Johnson says, which many have done. Still, the threats of sabotage and kidnappings or murders are not likely to drive the companies from Nigeria, Johnson says. “The companies have invested too much in Nigeria’s oil sector to pull out.”

Indeed, despite the unrest, many companies are pledging further investment in Nigeria. ExxonMobil just pledged to invest $11 billion in Nigerian fields through 2011. And “we anticipate future investment in existing operations and in future opportunities as they arise,” says Robert Davis, a spokesman for ExxonMobil. Shell, currently the largest producer in Nigeria, is equally optimistic, according to press statements.

The allure of the hydrocarbons outweighs the risks, Enfield says. Nigeria is one of the few markets in the world where multinational companies can still book reserves. Additionally, the crude is of very high quality, and companies can still “get a great return on their investment because there’s a lot of oil and natural gas there,” she says.

Any company that wants to produce there, however, needs to be cognizant of the risks, Enfield says. And those risks aren’t likely to go away over the next year, she says, as Nigeria has an election in April 2007, and violence always ramps up in the year prior to an election. “It takes a lot of money to buy” a governmental office, so until after the election, she says, “there will be a lot of violence in Nigeria.”

Megan Sever

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Mineral resource of the month: Lithium

Joyce A. Ober, the lithium commodity specialist at the U.S. Geological Survey, has prepared the following information on lithium, an important component in many batteries.

Lithium, the lightest metallic element, is silvery, white and soft, and highly reactive. It is used most frequently in chemical compounds or traded as mineral concentrates. Its thermal properties make it an ideal component in thermal shock-resistant ceramics, and its electrochemical properties make it an ideal material for several types of batteries.

Lithium consumption is often cited in “tons of lithium carbonate equivalent” because lithium carbonate is commonly used in many industries and is the precursor for all other lithium chemicals. In 2005, world lithium consumption was the equivalent of nearly 80,000 metric tons of lithium carbonate.

Chile has been the world’s leading producer of lithium carbonate since 1997, when it surpassed the United States in production. Most commercial lithium carbonate production in the world is from brine deposits because of the significantly lower cost of production combined with the abundance of lithium in brines. China is the only major lithium carbonate producer that mines hard-rock lithium mineral deposits for feedstock. Australia is, by far, the leading producer of lithium concentrates, but Brazil, Canada, Portugal and Zimbabwe also produce significant quantities.

Major uses for lithium chemicals include air conditioning, batteries, ceramics and glass, lubricating greases, pharmaceuticals and polymers, and primary aluminum production. Although the use of lithium in batteries has been viewed as a potential growth area for several decades, batteries had been only a minor end-use for lithium until recently.

Rechargeable lithium batteries, however, have become quite popular for electronic equipment, such as portable telephones, portable computers and video cameras. This popularity is because of the batteries’ even discharge over time and their low tendency to self-discharge resulting in long shelf-lives. Portable heavy-duty tools with rechargeable lithium batteries were introduced during the past year, and recent developments in hybrid-electric vehicles offer the potential for additional growth in rechargeable lithium battery demand, if lithium-ion batteries become the preferred battery type for this application. Non-rechargeable lithium batteries are used in cameras, electronic games, microcomputers, small appliances, toys and watches.

Although traditional markets are still important to the lithium industry, batteries are the growth leader, increasing by more than 20 percent per year in the past few years, and lithium-ion and lithium-polymer batteries appear to have the greatest potential for additional growth. Batteries may soon become the leading end use for lithium.

For more information on Lithium and other mineral resources, visit minerals.usgs.gov/minerals.

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