UPDATE 1-"Libya again" for oil if Nigeria strike hits
* Nigeria key oil producer pumping 2 mln barrels a day
* Global prices would spike if Nigerian "sweet" oil lost
* Nigerian oil exports worth around $250 million a day
* Abuja government likely to compromise to end strike
LONDON, Jan 13 (Reuters) - The world would face a Libya-scale supply problem if Nigerian oil exports were halted by a strike, with prices spiking, supertankers rerouting and big profits for producers of alternative supplies.
Nigeria's main oil union has said it will aim to shut down the country's oil and gas production from Sunday, adding teeth to a national strike to protest against a more than doubling of domestic gasoline prices.
But executives at oil companies with Nigerian contracts say the government in Abuja cannot afford to lose its oil revenue, and most expect a compromise soon to end the strikes.
Nigeria is Africa's biggest oil exporter and its high-quality "sweet" crudes, typically low in contaminants such as corrosive sulphur compounds, are exported to all the major consuming centres including Asia, Europe and the United States.
Even quite a short dispute would force up dramatically prices for other sweet grades of oil such as crude from the North Sea or Azerbaijan, and ironically Libya, which is now recovering after months of disruption during its civil war.
"Any strike would be very bullish for oil, getting more bullish the longer it dragged on," said an oil trader with a large U.S. bank.
"It would be Libya all over again," said another crude oil trader, who buys on behalf of a European oil refiner.
During the Libyan war, premiums of sweet crude rocketed to record highs versus sour barrels such as Russian Urals as European and U.S. refiners rushed to replace lost supplies.
The profitability of turning oil into products, known as refining margins, also slumped badly, crippling refiners such as Europe's troubled Petroplus.
Fears of disruption to Nigerian exports have helped underpin global spot oil prices this week, keeping North Sea crude benchmark Brent above $110 per barrel. Price moves would be dramatic if production and exports were affected.
Producers of alternative high-quality crude could expect an immediate rise in income if Nigerian supplies halted, with premiums rising for North Sea Brent over poorer quality Dubai. The big losers would be consumers and the Nigerian government.
"A halt to oil exports would be nothing short of catastrophic for Nigeria," said one senior executive at a U.S. oil company with Nigerian contracts who declined to be identified. "We expect a compromise fairly quickly now."
Nigerian workers took to the streets for a fifth day of strikes on Friday after trade unions broke off talks with President Goodluck Jonathan.
But union officials said they would suspend the strikes over the weekend and allow airports to reopen so that their leaders could travel to the capital, Abuja, for talks.
Executives in foreign oil companies that trade with the state Nigerian National Petroleum Corp. said they expected those talks to bear fruit, because the consequences of losing oil income would be unbearable for Abuja.
Nigeria is a key swing producer, selling more than 2 million barrels per day (bpd) of crude oil and other light hydrocarbons worth an estimated $250 million a day.
Crude oil exports account for 80 percent of government revenue and 95 percent of foreign currency earnings, leaving Africa's second-largest economy dependent on oil sales.
Nigerian Finance minister Ngozi Okonjo-Iweala has pledged to trim government spending this year. A serious oil outage would make it impossible to keep Nigeria's fiscal deficit within 3 percent of GDP this year and would increase public borrowing.
Central Bank Governor Lamido Sanusi said on Thursday the strikes were costing the economy over $600 million a day and any oil disruption would make things "very tough".
Many key oilfields are offshore, are staffed by foreign nationals and have high levels of automation, which would slow the impact on production of any stoppage. But even offshore fields need paperwork, and if officials were to strike, those facilities would be affected, industry sources say.
"It would make sense for the government either to delay the end of the fuel subsidies or to come up with another compromise," said Olivier Jakob, an energy analyst at consultants Petromatrix in Zug, Switzerland.
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