The 11th and final country to join the Organization of Petroleum Exporting Countries (OPEC) in 1971, Nigeria's 25 billion barrels of proven oil reserves place it among the world's top oil-producing nations. The country plans to boost its oil reserves to at least 40 billion barrels by 2010 after recently discovering large oil deposits in deeper offshore waters, according to OPEC and the Nigerian Ministry of Petroleum Resources.

Nigeria's economy is heavily dependent on its oil sector, which accounts for some 90 percent of export revenues and 41 percent of its gross domestic product, according to a 2002 report by the World Bank and information from the Nigerian Ministry of Petroleum Resources.

The United States is Nigeria's top export partner. Nigeria in 2002 ranked as the U.S.'s fifth-largest oil supplier, although its exports have dropped by 8 percent since 1997, according to the Central Bank of Nigeria. The U.S. Office of Trade characterizes Nigerian-American commercial relations as "essentially strong," noting that U.S. imports from Nigeria, mostly oil, totaled $5 billion for the first half of 2001.

Despite its relative abundance of natural resources, the expansion of Nigeria's oil sector has been stymied by its antiquated infrastructure and the "frustratingly slow" movement of goods through Nigeria's major ports, according to the U.S. Office of Trade in 2002. The U.S. government attributes these problems — which continue in 2003, according to the U.S. Department of Energy — to mismanagement during the dictatorship of General Sani Abacha from 1993 to 1998.

Nigerian law has historically barred foreign firms from owning 100 percent of oil enterprises and other businesses the government deemed important to national security. However, President Olusegun Obasanjo, Nigeria's leader since 1999, has introduced reforms to privatize the government-owned and -subsidized oil operations, or parastatals, partly in an attempt to attract more capital investment and foreign business partners.

In 2003, Obasanjo's administration announced the government would be selling off the four state-owned oil refineries, all of its petrochemical plants and its oil marketing company, the Pipelines and Products Marketing Company (PPMC). The U.S. Trade Office welcomed the move, although it cautioned that Nigeria's privatization process appeared to be prone to delay, according to its 2002 country commercial guide.

A small number of domestic private oil businesses, such as Famfa Oil Limited, have increased their stake in the oil sector, following the Nigerian government's 1990 program to help boost indigenous participation. Those companies, however, represent a much smaller stake in Nigeria's petroleum industry than the multinational firms.

Otherwise, nearly all of Nigeria's oil production and development projects are owned by joint venture operations between the government-owned Nigerian National Petroleum Corporation (NNPC) and multinational corporations.

The biggest joint venture operation, the Shell Petroleum Development Company Ltd., accounts for more than half of Nigeria's daily oil production and reserves. The massive operation is partly owned by the NNPC, which controls a 55 percent stake and the Netherlands-based Royal Dutch/Shell Group of Companies, with a 30 percent interest. Elf Petroleum, a subsidiary of the Paris-based TotalFinaElf, owns 10 percent, while Agip, a subsidiary of Italian energy giant Eni, holds a 5 percent stake.

The Mobil Producing Nigeria Unlimited is the second-largest joint venture operation, of which the NNPC owns 60 percent and the Texas-based Exxon Mobil holds the remaining 40 percent.

Nigeria's government took in more than $17 billion from oil exports in 2002, but the petroleum industry generates few employment opportunities or income for the majority of Nigerians, whose per capita income falls below $300 per year, according to the U.S. Embassy in Nigeria's 2002 commercial guide.

Most of Nigeria's oil fields are located in the swamps of the Niger Delta, an oil-rich region that is also the main location of ongoing social conflict and political violence.

The high unemployment and poverty levels in the Delta region have exacerbated a long-running conflict between the indigenous community and the oil companies. Some elements of the population have even turned to hostile activities like sabotage, kidnapping and extortion.

According to a 2002 World Bank report, additional sources of conflict stem from the multinational petroleum corporations' decisions to contract foreign workers instead of members of the local population, which has kept the indigenous communities from enjoying the benefits of their region's oil resources. Native communities have also protested the environmental pollution and damage they say has come from oil companies' development projects, for which the native peoples claim they rarely receive compensation, according to lawsuit transcripts filed on their behalf.

The problems facing such communities gained international attention in 1995 after the execution of activist and writer Ken Saro-Wiwa, who protested against Shell's oil development projects and environmental damage to the native land of the Ogoni people, an ethnic group that predominates in the Niger Delta region.

Saro-Wiwa created and led the Movement for the Survival of the Ogoni People, one of Nigeria's first large-scale protest movements aimed at protecting native lands from economic and ecological exploitation by the military government and multinational oil companies.

In response to the execution, the United States, England and the European Union imposed sanctions against the Abacha regime. These sanctions were lifted following Abacha's death in 1998.

Under President Obasanjo, Nigeria has sought to alleviate friction between indigenous communities and oil corporations. Obasanjo in 2000 declared a 13 percent revenue re-allocation program for the communities in the Niger Delta's oil-producing regions, a notable increase from the previous 3 percent allocation.

Still, conflicts between oil workers, corporations and local populations continue to plague the country and its oil sector.

The NNPC reported more than 800 incidents of pipeline sabotage from January through October 2000, and the government lost some $4 billion in oil revenues that year due to vandalism. In January 2001, the Nigerian navy announced plans to crack down on arson attacks on oil facilities. The government also ordered the navy to sink any ship carrying stolen crude products destined for the black market.

In July 2002, some 150 women in southern Nigeria occupied a Chevron oil terminal, trapping some 800 workers, to demand better employment for their families and investment in the local community. The eight-day siege ended after the Chevron Nigeria firm agreed to the women's demands to hire more than two dozen villagers and to build schools, water systems and other amenities.

The siege occurred just one month after several international oil conglomerates, including the California-based ChevronTexaco, Shell Oil (a subsidiary of Royal Dutch/Shell Group), and TotalFinaElf, suspended oil production in the Niger Delta region and evacuated most of their staffs, due to the increased fighting between the armed forces and the Ijaw ethnic group. This temporary suspension halted nearly 40 percent of the country's total oil output, delivering a sharp blow to Nigeria's economy and to foreign confidence in the country's oil industry.

Since then, Shell has reported a "welcome reduction" in the number of hostage-taking cases from 45 in 2001 to 24 in 2002. Shell attributed the change to oil companies' efforts toward improving community relations, along with the Obasanjo government's reforms and initiatives to better integrate the native population with the oil sector.

Bill Knight, a regional program director of Pro-Natura, a non-governmental organization, told the Christian Science Monitor in May 2003 that the oil industry is taking steps to improve community relations, but adds that big difficulties remain, such as the dispute between villages receiving substantial aid from oil companies and those receiving nothing at all.

"The oil companies are changing gradually," Knight said. "Nothing is going to change overnight -- but there is a lot of positive thinking going on."

-- By Elizabeth Harper, Online NewsHour

Excerpt from Ken Saro-Wiwa's The War Against the Ogoni, 1992

"Petroleum was discovered in Ogoni in 1958, and since then an estimated 100 billion US dollars worth of oil and gas has been carted away from Ogoni land. In return for this, the Ogoni people have received nothing."