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 told federal lawmakers earlier this week.

The initiative, said Yayale, 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, This Day newspaper reported Wednesday.

The country's top defense official noted that the decision to reach out to the militants was part of President Umaru Yar'Adua's effort to combat violence and lawlessness in the delta.

Since his election last year Yar'Adua has reached out to the militants and asked for them to give his administration time to tackle the problems of the delta. The proposed reforms include development projects in the impoverished region abundant in natural resources and economic reforms to the Nigerian economy, particularly its petroleum sector, which generates up to 95 percent of the country's revenue.

However, militant groups like the Movement for the Emancipation of the Niger Delta instead have increased attacks on oil and gas installations in the region, helping to drive up world petroleum prices to record highs.

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.

The militants have called for a more equitable distribution of the country's oil wealth.

Meanwhile, the Nigerian government also appears keen on cracking down on foreign oil companies on the financial front, demanding nearly $2 billion in oil arrears from Royal Dutch Shell and ExxonMobil.

Both companies said they have been in full compliance with Nigerian law and owe no back taxes to the federal government.

Some speculate that the Nigerian government is trying in effect to renegotiate agreements with both companies without a formal return to the bargaining table in hopes of generating more revenue for its Nigerian National Petroleum Co.

The NNPC has suffered chronic capital shortfalls in recent years and reportedly has been unable to raise the money necessary to fund its share of production agreements with some foreign companies working in Nigeria.

(e-mail: [email protected])

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