* Niger Delta region mired in poverty, conflict
* Government is trying to broker a peace deal with militants
* Sackings of oil workers, delayed wages threaten stability
* Oil majors blame late payments from state
By Tife Owolabi and Libby George
PORT HARCOURT, Nigeria/LONDON, March 16 (Reuters) - The moment a group of Nigerian contractors met executives from Italian oil major ENI to discuss unpaid wages they started shouting, calling them fraudsters and liars until a police commander restored calm.
Wenenda Mpi, local manager of ENI unit Agip, blamed the payment delays on debts owed by the Nigerian National Petroleum Corporation (NNPC) and said the government had promised to sort the problem out.
The heated meeting, called after hundreds of ENI contractors threatened a protest that police feared could turn violent, highlights the challenge of stabilising the Niger Delta oil region, even though attacks on oil facilities have halted.
Militants were persuaded to stop the attacks by promises of more investment and jobs from visiting officials including Vice President Yemi Osinbajo, a technocrat who stood in for President Muhammadu Buhari this year while he had seven weeks of medical treatment in London.
That has helped restore output to close to its former level 2.2 million barrels a day (bpd) from the 1.15 million bpd it hit last year. But it is unclear how long the calm will last.
Protests like that against ENI in the region's biggest city Port Harcourt are common, partly because low global oil prices mean oil firms are firing hundreds of workers and cutting back on contractors such as welders, security guards and cooks.
The ENI contractors showed up on time at the city's police headquarters for the meeting brokered by a local police commander, and tempers were high by the time three AGIP managers and the police boss arrived more than an hour later.
"We are giving Agip a two week ultimatum to pay all outstanding debt," said Clement Adaminegbe, head of contractors at Agip, threatening unspecified further action. "In case of failure we will take a clear stand."
Mpi promised to look into the grievances but was shouted down by the workers until the Commissioner of Police Zaki Ahmed stepped in -- persuading them to meet again next week in the presence of an Italian manager.
"I want both parties to resolve the issue amicably," he said, addressing the stone-faced protesters at the meeting attended by a Reuters reporter.
Since the start of the year, vice president Osinbajo has been going back and forth to the swamps land, promising to drag the region's population out of poverty with a bigger share of Nigeria's huge oil wealth.
Residents say Osinbajo, a Christian like most in the southern region, has connected much better with them than Buhari, a Muslim from the north, who last year sent the army to hunt down militants and has only visited the region once.
Osinbajo has proposed legalising illegal oil refineries to ensure employment for angry youths who often join militants, although a military campaign to hunt them down has continued.
The future of the fragile peace will depend on whether the government follows up on such proposals at a time when Africa's biggest economy is hit by its first recession in 25 years.
State oil firm NNPC has been planning for two years to pay back funds owed to oil majors for joint oil operations. The government said in December a remaining $5.1 billion would be paid back in five years, a time scale which means tensions over payments on the ground will likely continue.
Locals are demanding that oil majors relocate their headquarters to the region – a move that most are loath to make due to security concerns.
A spokesperson for Shell's Nigeria unit said they had no such plans, Chevron and Exxon declined to comment on any relocation and a spokesperson for ENI did not respond immediately to a request to comment.
The oil swamps are home to 40 ethnic groups competing for a share of oil money, a major obstacle to reaching an agreement that would put a permanent end to attacks on oil facilities.
"There's a kind of cycle of violence in the Delta," said Anthony Goldman of Nigeria-focused Promedia Consulting. "It's not just about paying people off. This money is there – it's in the budget. It's really about what the situation is on the ground."
Villages fight for contracts, forcing oil firms to recruit only their youth as guards or risk pipelines being blown up by rejected hires. Or they demand firms to buy food or cement from them and block passage of vehicles if they bring in supplies from other villages, oil workers say.
"The issue of surveillance contracts is not working well, we will revisit it," the Agip manager said at the meeting, referring to security contracts with host communities.
The protesters handed the Agip delegation a list of 16 demands including a cash payment of 10 million naira ($32,000) to "demobilize" the planned protest. They also want to get 60 percent of future work tendered by Agip.
Officials have repeatedly visited the biggest Delta group of Ijaw from which the Niger Delta Avengers, the biggest militant group, recruits. That has not gone down well with other groups.
"If the people of the upland part of the region are not treated with same level of respect as those in the creeks, there will never be security for the oil assets you so much cherish," the militant group Niger Delta Greenland Justice Mandate said in a media release last week.
Shell has been reluctant to reopen the only key pipeline that is still down – Trans Forcados – and oil traders say there are still worries from buyers about the reliability of Nigeria’s exports, given the security problems.
Locals hope Buhari will allow Osinbajo to continue his peace efforts in the Niger Delta after he resumed work on Monday following his medical leave.
"Osinbajo...was working hard to return peace," said Austin Ozobo, a Delta activist. "Our fear is that things may get worse with the return of President Buhari, certain steps or modalities taken by the (former) acting President Osinbajo to restore peace in the region may be abandoned." ($1 = 314.2000 naira)
writing by Libby George and Ulf Laessing; editing by Philippa Fletcher