Guerrilla fighters from a group seeking independence for the Niger Delta raided the energy giant Shell's Benisede flow station, torched two houseboats and sabotaged equipment.
The Nigerian military refused to say how many soldiers and militants had been killed in the fight, but local press reports and a security manager working in the industry said that around 15 troops were killed.
Shell has also confirmed that a cook working at the site died and that 10 more workers had been injured.
Shell shuts doors
Following the attack, Shell shut the Benisede flow station and three nearby plants, evacuating 326 staff from the delta swamps for safety.
"Following the general insecurity in the Benisede area, the company thought it prudent to minimise the risk to personnel by evacuating staff from the station and neighbouring fields," Shell said in a statement.
But the oil giant added, it "has no current plans to pull out of the Niger Delta."
Oil shortfall
Tensions were already high in the region after Wednesday last week, when the militants blew up the TransRamos oil pipeline and kidnapped four foreign oilmen - an American, a Briton, a Bulgarian and a Honduran.
The hostages, who work for Shell subcontractors, are still thought to be being held in the delta near the Bomadi Creek, a region of mangrove swamp and dense forest 300 kilometres southeast of Lagos.
"There is no new news about the hostages. We continue to work closely with the Nigerian authorities and their employers to try to ensure their safe release," Shell spokesman Andy Corrigan said.
Following the pipeline blast, Shell slashed production by 106,000 barrels per day (bpd), by shutting down the pumps at Benisede and the three nearby plants.
In addition, "technical problems" in the EA field, from where the oil workers were captured, have caused a further shortfall of 115,000 barrels.
In total these production problems account for more than eight percent of Nigeria's total daily production of 2.6 million barrels.
Shell says work has begun to repair the TransRamos pipeline but it is too early to say when the firm might be able to lift a statement of "force majeure" warning customers of delays to crude exports.
Both the pipeline blast and the kidnapping have been claimed by a group dubbing itself the Movement for the Emancipation of the Niger Delta (MEND), which seeks independence for the region's 14-million-strong Ijaw ethnic group.
"We are capable and determined to destroy the ability of Nigeria to export oil," the group warned, in a statement issued at the weekend.
MEND has demanded the release of Ijaw leaders Mujahid Dokubo-Asari, a delta warlord who will appear in court over treason charges on Tuesday, and Diepreye Alamieyeseigha, a former state governor accused of embezzlement.
Shell has also been criticised by locals, for failing to invest in their region where an estimated 20 million people live in poverty.
Price rises
World oil prices surged on the news of this recent attack and threats by Iran to raise the price of oil in response to threatened sanctions over its nuclear program.
Nigeria's low sulphur crude, which is ideal for refining into petrol for road transport, is highly prized by American refineries where it accounts for ten percent of imports.
The British oil giant BP estimated production in 2004 at 2.5 million bpd, or 3.2 percent of global output.
BP estimated Nigerian reserves at 35.3 billion barrels, or 3.0 percent of the total worldwide.
Almost all of this crude and condensate is exported, making a key player in the OPEC cartel, within which it is the third-biggest producer, behind Saudi Arabia and Iran.
In London, Brent North Sea crude for February delivery hit a three month high of 63.18 dollars per barrel because of concerns over Nigeria and fears that Iranian exports may be hit by wrangling over that country’s nuclear ambitions.
The main US and European energy giants, Shell, ChevronTexaco, ExxonMobil, Total and Agip, all have major concessions in Nigeria, where they generally work in joint ventures with the state Nigerian National Petroleum Corporation.
Several small firms from Nigeria, Asia and South Africa have also begun buying licences to prospect for oil offshore or exploit marginal fields alongside the main production areas of the delta and further inland.