The militants, according to NNPC head Abubakar Yar'Adua, originally had asked for $100 million in protection money, though energy officials were able to talk the armed group into accepting a payment of $6 million per month.

Yar'Adua, who admitted paying the militants in testimony before Nigerian lawmakers, later recanted his statement.

The payments reportedly were made after projects in the petroleum-rich Niger Delta incurred an estimated $81 million in losses over the last couple of months because of ongoing violence by the militants, who regularly attack onshore and offshore oil platforms, oil and gas pipelines and kidnap foreign workers in the region.

"The price we pay is very high. It is difficult to get expatriates to work in the Niger Delta. We paid militants $12 million because we were losing $81 million to the problem of the Charnomi pipeline in Delta State," Yar'Adua said in his testimony.

In an effort to prove they are not on the take from the NNPC, Nigeria's leading militant group, the Movement for the Emancipation of the Niger Delta, released a statement Wednesday denying they accepted any such payment and promising to blow up a strategic pipeline in the next 30 days.

"To prove we were not part of the deal, the Chanomic Creek pipeline (in Delta State) and other major pipelines will be destroyed within the next 30 days," a MEND spokesman told local media via an e-mail statement.

"I think this is yet another indicator why there is greater need for transparency in the oil sector," said Emira Woods, co-director of Foreign Policy in Focus at the Institute of Policy Studies, who also expressed skepticism about the validity of the report.

MEND said the payoff was made to armed groups that do not share their goal of a more equitable distribution of Nigeria's oil wealth.

"This criminal gang is not a genuine part of the Niger Delta agitation for justice but a front. They cannot be labeled as militant freedom fighters," a MEND spokesman said, the BBC reported.

MEND and other militant groups have been blamed for hundreds of kidnappings. Increased violence against oil operations in the delta has caused significant drops in the country's oil output, according to the Nigerian government and independent accounts. Before militants and other armed groups stepped up hostilities in the Niger Delta beginning in late 2005, Nigeria produced about 2.5 million barrels per day. Since then, production reportedly has decreased by at least 20 percent, perhaps even by one-third, some analysts warn.

Since the 1970s, Nigeria, Africa's No. 1 oil producer, has pumped more than $300 billion worth of crude from the southern delta states, according to estimates. High unemployment in the delta, environmental degradation due to oil and gas extraction, and a lack of basic resources such as fresh water and electricity have angered the region's youth, who have taken up arms, many times supplied by political leaders, and formed militant groups and local gangs.

While the payoff to the militants was widely condemned in Nigerian political circles, it wasn't the first time armed gunmen in the delta have been offered cash by the government to end their armed assaults on the oil and gas industry.

In May, the Nigerian government announced it intends to employ the very same militants often blamed for attacks on oil installations in the Niger Delta to guard the region's oil pipelines.

In a surprising and certainly controversial move, defense officials said they would negotiate a possible protection agreement with militants.

"We will engage them to police oil pipelines, but they must first form themselves into limited liability companies for us to discuss with them," Nigerian Defense Minister Yayale Ahmed said.

The initiative, Ahmed said, not only would help curtail attacks on oil installations in the delta carried out by armed groups, including rival militants, but also would prevent foreign oil companies from illegally "bunkering," or tapping into rival oil reserves.

"This will check the activities of even oil companies who cleverly engage in oil bunkering. We must fight criminality wherever it exists," the minister said.

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