Shell looks set to strike it lucky as Nigeria heads for showdown with Opec over quotas

Shell could be on the brink of a massive windfall in Nigeria in which the oil giant triples its production from the West African country.

Analysts believe that of all the world's large oil companies, Shell is uniquely placed to take advantage of forthcoming political upheaval in Nigeria, which could see the country break free of Opec. Nigeria is believed to be on the brink of a giant jump in national output, which would in effect involve Shell in the business of pulling crude out of the ground.

The analysts' theories centre on the Nigerian elections, due to be held in April. While most political observers expect the current president, Olusegun Obasanjo, to be re-elected, the national finances will be centre stage. As Morgan Stanley's oils team explains: "We would be surprised if the country's energy policy did not become an important campaign issue, considering that oil accounts for 75 per cent of government revenues."

The problem for Nigeria, say the experts, is that its only route to financial stability lies through greater exploitation of its oil and gas reserves. Unfortunately, because of its membership of Opec, its pro- duction quotas are strictly limited. Richard Savage, oils analyst at Banc of America, believes Nigeria's desire to pump more oil will soon put it on a collision course with the Saudi-led cartel.

"We see Nigeria's socio-economic plight driving its interests even further away from those of Opec and threatening to make its commitments to existing quotas untenable," he says.

Nigeria has repeatedly appealed unsuccessfully to Opec to be allowed to produce more oil. "If Opec fails to award Nigeria higher quotas at this time, it may feel it has the moral and commercial justification to ignore current quotas," says Mr Savage. "The natural conclusion of this would be a structural undermining of Opec cohesion."

Shell – facing demands for $1.5bn (£930m) of payments in Nigeria for damage to local communities – stands to gain whether the country is granted bigger quotas, or leaves Opec altogether.