Royal Dutch/Shell, the oil multinational, could be forced to pull out of Nigeria by 2008 because of violence in the oil-producing Niger Delta region, according to a confidential report commissioned by the company.
The report, by a group of outside consultants, said Shell had fuelled conflict through its policies on community relations, access to land and contract awards.
Nigeria is one of Shell's most important countries of operation, accounting for about 10 per cent of worldwide production as well of some of the company's most promising future fields.
The report, which Shell has declined to publish in full, was commissioned as part of its work to help develop a peace and security strategy with other interest groups in the Delta.
Shell did not agree with the authors' conclusions that it would have to withdraw in five years, but admitted conflict in the Delta had "the potential to get worse" if no action were taken. "Government and local communities must take the lead in ending conflict. But we are also determined to help."
Shell operates and has a 30 per cent shareholding in a government-controlled joint venture that accounted last year for just under half Nigeria's official production of about 2m barrels a day. The venture, which also includes France's Elf and Eni of Italy, invested $2.3 billion last year. Nigeria accounted for about a third of the 3.9 billion barrel cut in global proved reserves made by Shell this year.
Shell does not split out the figure for its proved reserves in Nigeria but the total for the Africa region is 2.37 billion barrels, compared with a worldwide total of 14.35 billion barrels. The bulk of its African reserves are in Nigeria.
Oil companies' operations in the Delta are frequently disrupted by theft, militias and local protests at the failure of multinationals and the government to deliver development after more than 40 years of production.
In its annual People and the Environment report released yesterday, Shell said it lost 9m barrels of oil to theft last year and had forgone 43m barrels after violence in the western Delta forced it to shut swamp facilities.
Oronto Douglas, a Nigerian rights activist and co-author of a highly critical book about Shell, Where Vultures Feast, said it had been "key architect" of the Delta crisis over the past two decades. "They will either change totally, or be consumed."
Shell has a target to increase joint-venture production to 1.5m barrels a day by 2006. It is increasingly looking to develop economically attractive deep offshore fields, away from the Delta's problems. The deep offshore projects are expected to bring production increases of 200,000 barrels a day by 2006.
Shell was heavily criticized after the 1995 executions of the writer Ken Saro-Wiwa and eight other social activists by the then military government.