SHELL may be forced to abandon onshore oil production in Nigeria because of the endemic violence and crime in the Niger Delta, according to a report commissioned by the oil company.

The report, written by WAC Global Services, a group of international consultants, predicts an escalation in the level of violence in Nigeria’s onshore oilfields. It also questions whether Shell can continue to operate beyond 2008 without risking violation of its business principles, which include a commitment to human rights.

Nigeria is a highly profitable oil-producing province for Shell. Operating through SPDC, a joint venture with the state oil company, it produced over 900,000 barrels per day last year but its operations in the delta have been plagued by community violence, oil theft and hostage-taking.

Shell yesterday rejected the report’s suggestion that it might abandon its onshore operations but confirmed that it had engaged conflict-resolution consultants to examine the situation in the delta.

A spokesman said: “We do not agree with their conclusion (that Shell might quit its onshore operations) but their report has been helpful in highlighting how we can sometimes feed the conflict.”

The report suggests that Shell and its staff contribute to conflicts between warring communities in the delta through the award of contracts and payments for land use and the reliance on Nigerian security forces.

Desperate poverty in one of the world’s richest hydrocarbon provinces has fomented bitter political conflict between local communities and the Nigerian Government, which in recent years has escalated into a state of near civil war. Shell suffered 20 hostage incidents last year and some 45 million barrels of oil were not produced due to the shutdown of oil operations.