(Updates with MEND claiming responsibility for pipeline attack)

By Tom Ashby

ABUJA, Nov 15 (Reuters) - Attackers blew up a Nigerian crude oil pipeline on Thursday, extending a month-old resurgence of violence against Africa's top oil producer and dashing hopes for a government peace drive.

The rebel Movement for the Emancipation of the Niger Delta (MEND) claimed responsibility for the attack at Royal Dutch Shell's <RDSa.L> Forcados oil terminal.

It was a setback to Shell's efforts to restore output from the Niger Delta cut by an earlier wave of militancy in 2006.

It also underlined disaffection by militants with the government's handling of a peace initiative, which began in May with the inauguration of President Umaru Yar'Adua.

"Our strategy is to nibble continuously on the oil industry until they are crippled. We are determined to make the military busy enough to justify the huge budget for security in the region," the MEND said in a statement.

A Shell spokesman said the company had shut in some production and was preparing for repairs and a cleanup. Industry sources said dynamite was used and a large volume of oil spilled at the site in the southern state of Delta.

Shell declined to specify the volume of production affected, but an industry source pegged it between 20,000 and 50,000 barrels per day (bpd).

The multinational was only just restoring production from the Forcados region after an earlier wave of militant attacks and kidnappings cut 477,000 bpd there in Feb. 2006.

Output stood at about 70,000 bpd before this explosion, and had been expected to rise by another 160,000 bpd by July.

Oil futures in New York briefly hit $94.64 a barrel after the explosion, but subsided to $93.40 by 1426 GMT, down 69 cents on the day.

MAJOR BATTLE

Violence has surged across the oil producing Niger Delta since the arrest in September of Henry Okah, a MEND factional leader.

Okah's MEND has now claimed responsibility for four separate attacks on major oil facilities since Oct. 20, although it denied being responsible for killing 21 Cameroonian soldiers at a border post on Monday. However, militant, government and industry sources had said MEND was likely behind that as well.

The Nigerian government on Thursday rejected an accusation by MEND that its troops had carried out the Cameroon attack and said relations between the two countries were excellent.

MEND has staged a string of attacks and kidnappings on oil facilities since late 2005, forcing thousands of foreign workers to leave and cutting output from Nigeria, the world's eighth-largest exporter, by a fifth.

The group says it is fighting for access to oil revenues by impoverished local communities in the delta that have been neglected by corrupt Nigerian governments for decades.

Nigeria's attempts to lure militants to the negotiating table have split them into factions, and activists say rival groups are rearming for a major battle, either between factions or against the federal government.

Jonjon Oyeinfie, a delta activist who is involved in talks with the government, said Abuja had failed to show sincerity in the peace process and this was encouraging violence.

"The federal government is not serious about the whole thing. We have been saying this for weeks and now everything is going out of control," he said. (Additional reporting by Estelle Shirbon; Editing by Richard Williams and James Jukwey)

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