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Shell Joint Venture to Invest $3.9 Billion in Nigeria

AMSTERDAM (AP) -- Royal Dutch Shell (NYSE: RDS-A  ) (NYSE: RDS-B  ) said Friday its Nigerian joint venture will spend $3.9 billion on investments in the Niger delta, including an effort to improve the safety of a major pipeline that was shut down this week after being damaged in a theft attack.

The joint venture, which is majority-owned by Nigeria's state oil company, will spend $1.5 billion on the Trans-Niger Pipeline, which carries 150,000 barrels of crude per day and is located in the eastern Niger Delta.

The pipeline was shut Wednesday after an attack that caused an explosion and fire. The company's Nembe Creek oil pipeline in Bayelsa State, which is of similar size, had already been shut due to a similar incident.

Shell, the largest oil producer in Nigeria, has been plagued for years by such attacks. By some estimates total oil theft in Nigeria amounts to $7 billion annually.

Shell spokesman Jonathan French said the Trans-Niger pipeline will be improved in some areas by being rerouted so that it runs through swampy areas or underwater, instead of over land, which will make it more difficult for thieves to reach.

In addition, it will be outfitted with a detection system that will alert the company "whenever a sabotage attempt is made," he said.

Mutiu Sunmonu, Managing Director of Shell's Nigerian operations, said the project shows the steps the company is taking to "to tackle pipeline sabotage and crude theft in the Niger Delta, which is the cause of so much environmental and economic damage in this region."

Environmental groups agree sabotage is a problem, but say the company bears much of the blame.

"Sabotage is a problem in Nigeria, but Shell exaggerates this issue to avoid criticism for its failure to prevent oil spills," said Audrey Gaughran of Amnesty International in a June 19 statement.

"The oil companies are liable to pay compensation when spills are found to be their fault but not if the cause is attributed to sabotage."

Shell said Friday the venture will spend an additional $2.4 billion on a series of five gas supply and infrastructure projects, also in the eastern part of the delta.

The company estimates that they will have an expected peak production that will be the equivalent of 215,000 barrels of oil per day.

"We certainly have reiterated our commitment to Nigeria," French said.

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