(Adds oil prices and new quotes in paragraphs 2, 5-7) By Austin Ekeinde PORT HARCOURT, Nigeria, May 15 (Reuters) - Villagers demanding rights over Nigeria's oil wealth have occupied a major export pipeline hub, forcing Royal Dutch Shell to make deeper cuts from Africa's top producer, authorities said on Tuesday. The protest began on May 10 and has cut output on the Trans-Niger pipeline by 170,000 barrels per day (bpd), Shell said. London oil futures surged $1.28 higher to close at $68.11 a barrel. A wave of unrest in Nigeria, the world's eighth largest oil exporter, has now reduced the country's crude shipments by almost 900,000 bpd, or one third of total capacity. The occupation was triggered by a dispute between Shell <RDSa.L> and the K-Dere community in Ogoniland, an area of the Niger Delta where Shell suspended oil production 14 years ago. It is still a transit route for crude heading to the Bonny export terminal. After five days of occupation, a local youth leader said the protesters had agreed to vacate the pipeline complex later on Tuesday night, but that the facility would remain closed until talks with Shell were over. "Tonight the militants at the facility will leave, but without negotiation it will not be open. What passes through our place, we must benefit from it," the youth leader told Reuters from K-Dere, asking not to be named. "We have no roads, no schools, no scholarships. We need development and empowerment," he added. Shell declared a "force majeure" on exports from Bonny, which normally ships 400,000 bpd, exempting it from fulfilling sales contracts. "MAYHEM" The action comes after a prominent militant group called for a month of "mayhem" in Africa's oil heartland in the wake of last month's disputed elections. The new government is due to take office on May 29, and militants see the transition as an opportunity to extract new concessions for the neglected region. There are currently 13 foreign workers held hostage by several different armed groups in the delta. Villagers in Delta state have been occupying a Chevron <CVX.N> oilfield since May 7, curbing 42,000 bpd there. Militants bombed three oil pipelines near the Brass export terminal in Bayelsa state on May 8, forcing Italian oil giant Eni <ENI.MI> to halt 98,000 bpd. The prospect of power changing hands is just one of several drivers behind violence in the remote region of swamps and mangrove-lined creeks. Unrest is rooted in resentment against an industry that has extracted billions of dollars in five decades but left the majority in poverty without electricity, water, schools or doctors. The situation is compounded by endemic corruption in government, abuses by security forces and gang fighting linked to a lucrative trade in stolen crude oil. President Olusegun Obasanjo visited the Ogoni region on Monday and berated local youths for disrupting the industry, which is the fifth largest oil supplier to the United States. The Ogoni people staged a series of non-violent protests in the 1990s which led to Shell leaving the area in 1993, in a precursor to the latest wave of violence. A new group known as the Movement for the Emancipation of the Niger Delta (MEND) has staged guerrilla attacks and kidnappings over the past 18 months that have forced thousands of foreign workers to flee. The MEND demands regional control over the delta's oil wealth, freedom for two jailed leaders from the region and $1.5 billion in oil spill compensation for delta villages. (Additional reporting by Tom Ashby in Lagos; Randy Fabi and Alex Lawler in London.
