Posts under ‘Nigeria’

JANUARY 12, 2012

By ALEXIS FLYNN

European energy companies are expected to return more money to shareholders in 2012 as stubbornly high oil prices swell their balance sheets.

With full-year results only weeks away, expectations are growing that heavyweights like Royal Dutch Shell will cap an extraordinary 12 months by raising dividends.

According to Deutsche Bank, the sector has “plenty of headroom” to support a forecast of 5% aggregate dividend growth in 2012. Already, it says, companies in the sector are expected to accumulate 50% more cash than they need to cover operating costs in 2012 and 2013.

Even BP PLC may raise its dividend.

The U.K. oil company, which for many years was known for bumper payouts, had to suspend its dividend in the wake of 2010′s Gulf of Mexico oil spill. Only last February did it resume payments, at a lower level.

As the company’s ultimate liabilities for the spill become clearer, management could be confident enough to increase the payouts, analysts from Credit Suisse say.

Investors in recent years have had to contend with major oil companies plowing their free cash into new sources of oil, and the technology to extract it, although the sector has remained a reliable source of dividends.

Still, Moody’s Investors Service points out, four energy companies—Shell, BP, Total SA and Statoil ASA—rank among the 20 European firms with the best cash positions. It also notes that the European energy sector as a whole ranks third, after utilities and automotive firms, in terms of its cash holdings.

Investors are still spooked by the memory of 2008. Crude prices were then rapidly dragged down by Lehman Brothers’ collapse and a sudden contraction in the global economy. Oil firms’ stock prices fell, but analysts say history is unlikely to repeat itself in 2012.

Oil and gas prices weathered last year’s uncertain macroeconomic environment because of supply issues, such as the civil war in Libya, while the earthquake and tsunami in Japan forced the government to temporarily shut down all nuclear power generation. Utilities had to scramble to buy liquefied natural gas, lending strength to LNG prices.

Growing tension between Iran and the West and threats to supply in Nigeria are likely to keep crude prices elevated for the foreseeable future.

Since higher energy prices are currently translating into superior cash generation, analysts say the sector’s top firms already feel confident enough to give money back to investors.

“Healthy cash flow should leave room to increase shareholder returns in the form of dividends or buybacks, for some select companies,” said Credit Suisse in a note.

It added that chief financial officers will also likely keep some cash on the books as insurance against economic risk and in case opportunities for mergers arise.

Continued high oil prices are the keystone upon which any largess rests, analysts argue. “The sector now requires an average $90 a barrel to achieve cash neutralityacross 2012/13,” said Deutsche Bank. If a company is cash-neutral, it is generating enough cash to cover its costs.

The firm most likely to deliver continued dividend increases in the medium term is Shell, according to analysts at Nomura. The bank says Shell will continue to see the benefit of its long-term investments in big-ticket projects in Canada and Qatar.

However, Goldman Sachs sounded a note of caution on Shell’s fortunes. It said that while the Anglo-Dutch giant could enjoy a bumper year, its fourth-quarter results could bring down its earnings per share.

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Judd-Leonard Okafor

12 January 2012

The environmental group, Friends of the Earth Nigeria, says the oil corporation Royal Dutch Shell must be held accountable for pollutions from its facilities, stopping it from causing further pollution and ensuring it deploys appropriate technology to deal with spills.

The group’s stance came after Senate committee on environment and ecology summoned the company, along with the environment ministry officials and two agencies in the wake of a 150km wide spill from a facility belonging Shell at Bonga, some 120km off the Nigerian coast

The two agencies are the National Oil Spill Detection and Response Agency, NOSDRA, and National Environmental Standards and Regulation Enforcement Agency (NESREA).

At the height of the spill, Friends of the Earth said it didn’t “expect anything meaningful” to come out of the summons, calling it “cosmetic.”

Philip Jakpor, media head at Friends of the Earth Nigeria, said, “We must hold these corporations accountable. They must not pollute our environment, they must deploy the same technologies that are effective that they use in other parts of the world here. There must not be double standards. And if they are liable to prosecution, you should go ahead and prosecute them.”

The group said it didn’t believe NOSDRA would be able to independently verify Shell’s claim that only around 40,000 barrels of oil leaked into the ocean.

“Most times the information that is made public is actually information from the same industries that do the pollution,” Jakpor told Daily Trust. “So, in this case we don’t believe their claim. We believe it would be far, far more than that.”

Independent bodies who monitored the spill hinted the amount of oil dumped in the ocean could exceed Shell’s claim.

But the Senate committee which summoned NOSDRA and the three other parties expressed doubts as well about whether the agency is equipped to handle the job.

The committee chairman Bukola Saraki said NOSDRA lacked vessels and now “relies almost exclusively on the grace and benevolence of the oil companies, in this case, Shell.”

Meanwhile, the oil company insisted last week it successfully completed cleanup of spill from the Bonga offshore oil field, resuming production there on January 1.

The company’s manager in Nigeria Mutiu Sunmonu claimed satellite and aerial imagery confirmed the leak “could not have reached coastlines in the eastern Niger Delta, as some media articles have suggested.” In updates the company posted on the net, he said the images of the spill reported came from a third party spill, “which appeared to be from a vessel, in the middle of the area that we had previously cleaned up.”

Copyright © 2012 Daily Trust. All rights reserved.

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By Oluwakemi Dauda, Jan 10, 2012

Some communities in Delta, Bayelsa and Akwa Ibom states have alleged the destruction of their farms and land in the oil spill at Shell Nigeria Exploration and Production Company (SNEPCO). Over 4,000 barrels of oil were spilled from Shell’s Bonga facility.

Describing the spill as the worst in the country since 1998, the communities, in a letter, called on Nigerian Maritime Administration and Safety Agency (NIMASA) and the Federal Government to assist their people, whose waters, have been polluted.

But when The Nation contacted the image maker of Shell, Mr Precious Okolobo on Saturday night, he said Shell is waiting for the report of the sample taken to the United States (US) to determine the impact of the spill on the shore, adding that his organisation is doing everything possible to clean up the environment.

“We have taken a sample of the oil in the beach to the United States. Not until the result is out, nobody is expected to talk of compensation. The National Oil Spill Detection and Response Agency (NOSDRA) has even confirmed that there was no way the spill could have got to Akwa Ibom State,” Okolobo said.

But in the petition sent to NIMASA, The Nation gathered that the affected communities complained that their source of livelihood, especially fishing, was affected by the impact of the oil spill.

The affected communities which included the people of Age and Oroibiri 1 and 2, according to sources at NIMASA, said the letter became necessary because Shell’s response to the spill fell short of national and international standards.They urged NIMASA to ensure that Shell pays for devastating their environment and the ecosystem.

The communities, according to the sources, also accused Shell of embarking on propaganda while they described the spill as massive that has affected birds, vegetation and other aquatic creatures in their domain.

Shell, the communities alleged, instead of addressing the problem embarked on propaganda to shift responsibility. This, the community insisted, is a diversionary tactic and urged Shell to make the name of the suspected third party public if it has any.

The people of the affected areas, have vowed to hold Shell responsible for anything that happens to them and their environment if it fails to prove beyond reasonable doubt that a third party was involved.

The communities, the sources said, are therefore, calling on the Federal Government, the National Assembly and NIMASA to send a delegation, which should include maritime reporters to the area for an on-the-spot assessment of the total devastation of their waters and their areas.

When contacted, a senior official of NIMASA confirmed the petition and urged Shell to be alive to its responsibilities by cleaning the waters and paying compensation to the affected communities and making remediation in line with national and international standards.

No national or multinational company, such as Shell, the official said, can do what the oil giant has done in the country in terms of environmental depredation and behave as if nothing happens.

When the spill was announced, NIMASA, the official said, made a sea and radio broadcast to all mariners and issued a marine notice in one of the daily newspapers to the public on the spill to curtail the spread to other areas, but Shell, he alleged, failed to act promptly.

Also, the Deputy General Manager, Public Affairs, NIMASA, Hajia Lami Tumaka, said so many members of the affected communities have come to their offices in Port Harcourt and Lagos, urging the agency to come to their aid.

“Yes, the people of the affected communities have contacted our offices and the director-general has allayed their fears and assured them of positive response to their yearning to avoid the breakdown of law and order in the area.”

The agency, she said, would enforce global maritime watchdog conventions as it relates to the management of the nation’s marine environment in this case.

On the discovery made by the team sent to the area by NIMASA, the image maker said: “As our technical crew approached these communities, the first thing that greeted them was the sight of coastline demarcated by oil leak and petroleum fumes. The community informed us that the spill drifted to the location on December 21, 2011.

‘‘For instance, at Age community, it was discovered that the oil spill affected its community coastline. At Orobiri One and Two, the aquatic environment was devastated by the spill impact. Water samples are collected from these communities. We were informed by these communities that other government officials and state personnel had earlier visited the communities.”

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06 Jan 2012

By John Iwori

As efforts to curtail the oil spill at Shell Nigeria Exploration and Production Company’s Bonga Facility continues, the Nigeria Maritime Administration and Safety Agency (NIMASA) has described the incident as a national disaster.

Describing it as the worst oil spillage to hit the country since 1998, the management of Nigeria’s apex maritime regulatory body called for urgent assistance for the affected community, whose waters have been polluted.

According to the management of the agency, which is the eye of the global maritime watchdog, International Maritime Organisation (IMO) in Nigeria, millions of aquatic life forms, which the people of the affected communities depend upon for survival, have been destroyed as a result of the oil spill.

Director General of NIMASA, Mr. Ziakede Akpobolokemi, stated this at a briefing in Lagos to give an update on the effect of the Shell’s Bonga facility.

Akpobolokemi, flanked at the briefing by top officials of the agency, including the Executive Director, Maritime Safety and Shipping Development, Dr. Ishiaku Shekarau, said the management of the agency has been informed by Shell about the incident and the need for a joint visit to the facility.

He stated that the joint visit would comprise NIMASA and other government officials as well, and noted that the source of livelihood of the affected communities, especially fishing, has been greatly affected due to the impact of the oil spill.

The NIMASA Director General said besides the negative impact on peoples’ means of livelihood, they no longer have potable water to drink as their source of water has been polluted by the oil spill.

“Further to the report of the preliminary investigation conducted by the agency in respect of Bonga Oil field on December 21, 2011, NIMASA representatives were at the leak location assisting in the rescue effort of the victims of the coastal community within Delta and Balyesa states, namely Aage and Orobiri one and two communities. They used boats from Warri to scrutinise these areas.

“At age community it was the discovered that the oil spill has affected the entire community coastline. At Orobiri one and two the aquatic environment was completely devastated by the spill impact. Water samples are collected from these communities. We were informed by these communities that other government officials and state personnel had earlier visited the area as well,” he said.

He said if Shell was sure that there was spill from third party as earlier alleged, “why are they making frantic effort to get to these almost inaccessible communities.”

“As our technical crew approached these communities, the first thing that greeted them was the sight of coastline demarcated by oil leak and petroleum fumes. The community informed us that the spill drifted to this location on December 21, 2011”, he noted, adding that the community has embarked on personal effort to clean the affected area.

As part of the agency mandate, he told reporters that officials of the agency had carried out an over-fly of the area to observe the extent of the spread of the spill and the danger posed to marine flora and fauna.

He also said the agency’s team is currently at the spilled location to assess the response efforts to ensure strict compliance with relevant regulations.

He added that the agency was in contact with Shell and the Nigerian Oil Spill Detection and Response Agency (NOSDRA) to ensure that adequate measures are put in place to prevent further degradation of the marine ecosystem.

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James Kimer on January 4, 2012.

As the second largest energy company in the world after Exxon-Mobil, Royal Dutch Shell has been a major player in Nigerian oil and gas from the beginning, overseeing the first commercial export of oil from the country in 1958 from the Oloibiri Field.  Their success over the years has been notable, with operations are spread over 30,000 square kilometres in the Niger Delta, including more than 6,000 kilometres of flowlines and pipelines, 86 oil fields, 1,000 producing wells, 68 flowstations, 10 gas plants and two major oil export terminals at Bonny and Forcados.

But after a number of accidents, attacks by militants, and political scandals, is Shell’s honeymoon with Nigeria coming to an end?  Some recent events and transactions indicate a shift in the Dutch company’s strategy in the country, opening a window of opportunity for new operators.

The past year has battered and bruised Shell’s operations in Nigeria, with both environmental issues and political risk increasing.  Just this week, the company was forced to conduct emergency repairs on a sabotaged trunkline pipeline in Nembe Creek, Bayelsa State, where more than 200 barrels of oil were siphoned off by thieves, forcing Shell to cut production by 70,000 barrels a day during the repairs.  Sabotage and theft by militant gangs is currently on the rise following a brief lull since its height in 2005, while the company reportedly suffers the loss of between 70 to 200 barrels of oil stolen per day.

In December 2010, Shell also experienced its worst oil spill in Nigeria in the past decade, as more than 40,000 barrels of crude oil was spilled at the offshore Bonga Field (the accident being caused by tanker mishap instead of the usual sabotage).  According to a report in the Washington Post, “Some environmentalists say as much as 550 million gallons of oil poured into the delta during Shell’s roughly 50 years of production in Nigeria — a rate roughly comparable to one Exxon Valdez disaster per year.”

As a result, political pressure against Shell has also been mounting from civil society.  The Environmental Rights Action/Friends of the Earth (ERA/FoEN) has been on the offensive since the spill at Bonga Field, issuing statements demanding that the government secure independent verification of spillage data while enforcing clean-up payments.  The company’s environmental and human rights record has been under scrutiny at the highest levels, with the United Nations Environment Programme (UNEP) issuing a harsh report in August 2011 that examined the ecological and public health ramifications of oil spills in Ogoniland.  One of the UNEP report’s key findings included the following:  “Control and maintenance of oilfield infrastructure in Ogoniland has been and remains inadequate: the Shell Petroleum Development Company’s own procedures have not been applied, creating public health and safety issues.”

Even before all these issues came about, there were indications that Shell may be scaling back its exposure to Nigerian energy.  Shell is the 30% owner of the joint venture Shell Petroleum Development Company of Nigeria Limited (SPDC), which also features major stakeholders such as the state-owned NNPC with (55%), TotalFinaElf (10%) and Agip (5%), which together is responsible for a whopping 50% of all oil production in the country.  However in November 2011, Shell completed the sale of its shares in two major oil producing blocks (OML 26 and OML 42), while at the same time they are working to close ongoing deals to sell their stakes to three other blocks (OML 30, 34 and 40).

Representatives from the company are keen to express that these sales do not represent the beginnings of an “exit strategy.”  According to statements made by SPDC Managing Director Mutiu Sunmonu to NEXT Newspaper, “what we are doing is consolidating our operations to strengthen even our future in Nigeria. We are in Nigeria for the long haul. Some of these assets are of more value to indigenous companies than the multinationals. The sale of marginal oil fields is an exercise aimed at growing indigenous capacity in the upstream oil and gas industry.”

However, it appears that in fact the divestiture strategy is aimed at offloading the most vulnerable assets  in the company’s portfolio – the ones located onshore, and therefore susceptible to attacks, kidnappings, theft, and sabotage, indicating a declining confidence in the state’s ability to maintain law and order in the Delta region.  In recent years, Shell has experienced a steep decline in production among its onshore assets in Nigeria.  In 2009 Shell CEO Peter Voser said that due to violence in the Delta region, production has slacked to 120,000 barrels per day from the previous 300,000 barrels per day.

“The overall security situation is still very fragile, the government had some success with their amnesty programme and we are looking now towards the next few weeks to see how this influences the whole security situation,” Voser told Reuters. “But it would be by far too early to say that it has improved. We are still dealing with the same kind of issues.”

Two years later, it looks like Shell might be losing patience.  The sale of these marginal fields such as OML 40, referring to oil and gas assets that have yet to be developed due to difficult location, infrastructure, and access, are bringing about a sharp increase of participation by indigenous companies.  New players in the Nigerian oil sector include Mike Adenuga’s Consolidated Petroleum, Femi Otedola’s African Petroleum (AP) Consortium, Elcrest, and Neconde Energy.  There are other indigenous companies which are actually backed by international finance, such as Oando (China), Perenco (Afren – a Nat Rothschild entity), and Equinox Group (Gazprom).

But the reasons motivating Shell’s divestitures may be more complex than the challenges of violence, insecurity, and public scrutiny.  After all, the company has survived some of the roughest periods of Nigerian history, including the murder of activist Ken Saro-Wiwa by the Abacha regime, which resulted in a $15 million lawsuit settlement.  In 2008, attacks by militant groups such as the Movement for the Emancipation of the Niger Delta (MEND) had reached such heights, that Shell was forced to steeply cut production, driving global oil prices to record highs well above $120 a barrel.  And yet, despite these harsh circumstances, the company persevered and held on up to the 2009 amnesty, which helped production recover.

The problem for the company may be bigger than just oil spills, theft, and attacks, as some observers point to the pending passage of the Petroleum Industry Bill (PIB), which would revolutionize the tax and royalty structure for international oil companies doing business in Nigeria, carving out a sphere of participation in production and exploration (as opposed to simply regulation) for parastatal companies.  First proposed in 2008 by the presidential administration of Umaru Yar’Adua, the PIB is a complex, 100-page document that has been repeatedly stalled in the legislature due to controversy and disputes over its contents and purpose.  According to the former Minister of the Federal Capital Territory of Abuja, Nasir El-Rufai, international oil companies such as Shell stoutly oppose the passage of the PIB and are actively lobbying against it because the bill contains new royalties structures for offshore production (because the Nigerian government forfeited these rights in a 1991 agreement).

And while the PIB remains stalled, much-needed foreign investment is put on hold.  According to one analyst interview by The Financial Times, “The wait for the adoption of the PIB is very damaging. It’s why the big new investments have been put on hold. The impact becomes exponentially more problematic [because] if reserves don’t get replaced, there is the risk of production capacity in Nigeria dropping for the first time in 30 years.”

As demonstrated by the overwhelming protests and public outrage over President Goodluck Jonathan’s decision to remove the fuel subsidy at the New Year, there is a strong social aspect to the country’s economic policies concerning the energy sector.  For most citizens, who live on less than $2 a day, the fuel subsidy was seen as the only way that the oil wealth was shared – and, with its removal, there could be increased public support for the passage of the PIB that aggressively targets the traditional energy players with higher taxes and more difficult conditions.

For the moment, public anger is directed toward President Jonathan and a small group of advisers.  But if this pressure translates into real political costs for the administration, it is possible to imagine President Jonathan finding a scapegoat in the foreign oil companies, and satiating voters with promises to pass the PIB and enforce payments on environmental clean-up costs.  If that’s the case, Shell’s divestitures may accelerate, while local companies – which are in no way more accountable – will take over more and more critical onshore production fields, posing an unknown risk to global energy supplies.

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By Richard Moniak

On Dec. 16, 2011 the federal Bureau of Ocean Energy Management (BOEM) gave Shell Oil conditional approval of their Chukchi Sea exploratory drilling plan. The agency directed Shell to shorten the proposed drilling season by 38 days to ensure that, if an accident occurs, they can cap a well blowout and clean up a spill before the sea ice returns. Alaska’s congressional delegation immediately blasted BOEM for being short-sighted. But are they really defending the merits of Shell’s plan or are putting their trust in the oil lobbyist talking points?

Sen. Mark Begich called BOEM’s decision a “last-minute monkey wrench into Arctic development,” and added, “Alaska has done off-shore exploration before, we’ve done it safely, and the technology is better now than it has ever been.” His statement implies BOEM should have rubber stamped Shell’s plan as if it had been rigorously analyzed and tested.

But Shell’s undersea well capping and containment system is still under design and their oil spill response plan requires approval by the Bureau of Safety and Environmental Enforcement. Even more to the point, Shell can’t possibly ensure that a spill won’t occur. And if one does, they can’t guarantee they’ll be able to contain it and prevent widespread environmental damage to the Arctic sea and coastal environments.

It’s the lack of such guarantees on environmental issues where our delegation’s position is inconsistent. Begich put that on display just one day earlier at a Senate hearing where he opposed the commercial production of genetically engineered (GE) salmon. “Looking at the available scientific information” he said, “it is clear that there is no guarantee that these GE fish won’t ever escape into the wild” and cause harm to our wild salmon and aquatic ecosystems.

Sen. Lisa Murkowski and Rep. Don Young also oppose commercial farming of these fish. So shouldn’t they, and Begich, be insisting on similar assurances against damage to our Arctic waters, especially considering that last August a Shell oil spill off the coast of Scotland turned into the worst in Great Britain in a decade. And, just last week, the industry added two new blemishes to their record. A Russian oil rig sank in Arctic waters and a Shell subsidiary spilled 1.6 million gallons of oil off the Nigerian coast.

So why are Begich, Murkowski and Young so willing to trust that Shell can safely operate in the Arctic Ocean? It could have a lot to do with lobbying pressure. According to the nonpartisan Center for Responsive Politics, between 2000 and 2006 Shell spent less than $100,000 per year for paid lobbyists on Capitol Hill. But that increased dramatically after the Bush administration opened up 70 million acres under Arctic waters to offshore oil and gas development. For each of the past three years Shell has spent more than $10 million to influence government decisions. That puts them among the top 20 corporations lobbying in Congress.

If you believe Shell Alaska Vice President Pete Slaiby, there is solid science behind this effort. In a Senate hearing last July he told Begich and others that, “Shell would not be working in the Arctic had we believed there was something, an event we could not control.”

That hubristic pronouncement echoes the words of Tony Hayward shortly after BP’s Deepwater Horizon drill rig exploded in the Gulf of Mexico. Speaking as the corporation’s chief executive officer he old reporters that BP was mounting “the biggest response by anyone in the industry ever, and we’re able to do it because we planned for it.” We all know how that story turned out.

The Deepwater Horizon investigators believe there was a systemic failure at BP to place safety ahead of profit. Is Shell any different? In their published “General Business Principles” they list protecting shareholder interests first among its five corporate responsibilities. Down at the bottom is being “responsible corporate members of society, to comply with applicable laws and regulations” and, last of all, “to give proper regard to health, safety, security and the environment.”

When it comes to our environment we need a delegation that holds these values in reverse. It’s their job to lead us in building a healthy society and that can’t happen if they place their trust in paid lobbyists.

• Moniak is a Juneau resident.

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By Godwin Oritse & Godfrey Bivbere

LAGOS— Management of Nigerian Maritime Administration and Safety Agency, NIMASA, has described the denial of Shell Petroleum Development Company, SPDC, on Bonga oil spill as irresponsible.

Speaking to newsmen in Lagos, yesterday, NIMASA’s Director-General, Mr. Patrick Akpobolokemi, said the inaction of the international oil firm over the management of the spill left much to be desired.

Shell had reportedly denied that the spill originated from their Bonga Floating Production Storage Off Facility, FPSO, insisting that investigation was still ongoing.

However, Akpobolokemi said: “Shell has not lived up to its responsibility.”

He said Shell, at a point, stated that there was another spill from a third party without proper proof, adding that NIMASA’s investigation revealed that there was no spill from a third party.

He categorically stated that the entire spill was caused by Shell and that the spill came from its Bonga operations 120 nautical miles off Nigerian coast. He noted that the entire ecosystem and aquatic life in that region had been affected, stressing there was near epidemic crisis situation in the area.

Akpobolokemi said: “Shell has neither behaved properly nor responsibly in this matter. Their response to the spill falls short of national and international standards.”

“From our investigation so far, even though the spill was announced December 20, we are sure the spill occurred long before that date.

“I am sure they have tried to cover up the spill until it became unbearable for them and they had no choice than to make the spill public.

“It is evident that from the FPSO to the Single Buoy Mooring, SBM, there are three discharge lines that Shell uses to move crude and these lines have 25 years warranty.

“Two of these lines were built by the same company, but the maker of the last one is unknown to us and these lines have been in operation for only 6 years.

“The pipes are 412 meters below the sea surface, meaning the spill may have occurred days before it came to the surface of the waters.”

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By Elisha Bala-Gbogbo – Jan 3, 2012 5:25 PM GMT

Royal Dutch Shell Plc (RDSA) shut oil flows of 70,000 barrels a day from the Nembe Creek Trunkline in Nigeria due to a leak caused by the theft of crude.

The pipeline, which supplies the Bonny export terminal, was halted Dec. 24. Shell is working on completing repairs before the end of the month.

“What is really worrying about this leak is that it happened on a facility which was commissioned in October 2009 to replace an old line which was repeatedly targeted by crude oil thieves,” Tony Attah, Shell’s vice president in charge of health, safety and environment, said today in an e-mailed statement.

Nigeria is Africa’s largest oil producer and the fifth- biggest source of U.S. imports. Shell, Exxon Mobil Corp., Chevron Corp., Total SA and Eni SpA run joint ventures with the state-owned Nigerian National Petroleum Corp. that pump about 90 percent of the country’s crude.

More than 200 barrels of crude that leaked after oil thieves installed two valves near a manifold on the pipeline have been cleared up, Shell said.

Europe’s largest oil company shut its 200,000 barrel-a-day Bonga field last month after it leaked less than 40,000 barrels in the country’s worst offshore spill in more than a decade.

Shell on Sept. 26 said it shut 25,000 barrels a day of crude from its Imo River field because of oil theft. The company on Aug. 23 declared force majeure, a legal clause that allows it to miss scheduled deliveries for circumstances beyond its control, on its Bonny Light crude exports after multiple pipeline incidents. The company shut its Adibawa pipeline on Aug. 22 after saboteurs cut crude lines, causing spills.

Attacks by armed groups targeting the oil industry cut more than 28 percent of Nigeria’s crude output from 2006 to 2009, according to data compiled by Bloomberg. Attacks subsided after thousands of militants campaigning for more local control of the delta’s energy resources accepted a government amnesty and disarmed in 2009.

To contact the reporter on this story: Elisha Bala-Gbogbo in Abuja at ebalagbogbo@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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Minister of  Petroleum, Mrs Dizeani  Allison Madueke

03 Jan 2012

Federal Government’s total dependence on Shell Nigeria Exploration and Production Company (SNEPCo) and its parent company, Royal Dutch Shell Plc, for the clean-up of the recent oil spill in Bonga deepwater oil field has exposed the weaknesses of Nigeria’s regulatory agencies – National Oil Spill Detection and Response Agency (NOSDRA) and the Department of Petroleum Resources (DPR), in carrying out their statutory functions. Ejiofor Alike writes

Bonga Field Project

Nigeria’s oil industry witnessed a new chapter in November 2005, when Shell Nigeria Exploration and Production Company (SNEPCo) began crude oil and gas production from the Bonga deepwater oil field, 120 kilometres offshore Nigeria.

Royal Dutch Shell’s former Executive Director in charge of Exploration and Production, Mr. Malcolm Brinded, had noted that Bonga would target an increase of about 10 per cent in Nigeria’s oil production and about 25 per cent increase in Shell-operated production in the country.

“Bonga begins a new chapter in Nigeria’s oil and gas production, and an important contribution to new material oil production for Shell. The project targets an increase of around 10 per cent in Nigeria’s oil production and around a 25 per cent increase in Shell operated production in the country. Nigeria’s deepwater is a frontier growth opportunity for Shell and we have several recent discoveries offshore and a strong acreage position. Bonga is a highly valuable asset for Nigeria and for Shell, and the field is coming on-stream to meet demand at a time when energy prices are high,” he said.

Former Managing Director of SNEPCo, who championed the development of the field, Mr. Chima Ibeneche had noted that the company pioneered the advance into Nigeria’s deep-water frontier, leveraging Shell’s global expertise to discover and develop producible oil and gas.

“Bonga will deliver excellent value to the Government and people of Nigeria, co-venturers, and to the shareholders for many years to come. I would also like to stress that the first oil from deepwater offshore Nigeria would not have been possible without the highly qualified and dedicated staff that have been working on this complex and challenging project within Shell, partner companies, contractors and government,” he said

With a development cost to first oil of some $3.6 billion, Bonga’s target was to attain the nameplate production of 225,000 barrels of oil and 150 million standard cubic feet of gas per day.

Located in Oil Prospecting License (OPL) 212, the 60 square kilometres field is situated in water depths of more than 1000 metres.

Production facilities comprise one of the world’s largest Floating Production Storage and Offloading (FPSO) vessels and deepwater subsea infrastructure.

The field’s initial 16 subsea oil producing and water injection wells are connected to the two million barrel storage capacity FPSO by production flow lines, risers and control umbilicals. It was the first time inconel clad Steel Catenary Risers was used on an FPSO anywhere in the world. The Bonga concession was awarded in 1993 during the first round of bidding for the country’s deepwater frontier acreage.

It is operated by SNEPCo -55per cent, on behalf of the Nigeria National Petroleum Corporation (NNPC) under a Production Sharing Contract (PSC).

SNEPCo has a Joint Operating Agreement (JOA) with Esso – 20per cent; Nigerian Agip Exploration Limited (NAE) -12.5per cent and Elf Petroleum Nigeria Limited -12.5per cent.

Project Significance
Shell’s Bonga deepwater field was significant in a number of ways. The project was the first in the world where large steel catenary riser (SCR) was installed on an FPSO. Globally, Bonga project was also the first to use inconel cladding for a dynamic riser application.

The Bonga field also witnessed the first installation of a large diametre steel tube umbilical with bonded composite material cover as gas-lift risers.

These were arranged in dynamic catenary configuration, off a spread moored FPSO, and connected to the base of a steel catenary flow-line riser.

It was also the first, largest and most technologically advanced polyester moored deepwater buoy to be built in Nigeria.

The project also marks the first implementation of large size dynamic flexible pipe – 2.3km long; for oil transfer to a Single Point Mooring (SPM) offloading buoy.

Other the technological feats achieved with Bonga also include the fabrication and installation of the world’s largest deepwater Single Point Mooring Buoy at Nigerdock’s Snake Island yard in Lagos.

Samsung Heavy Industries constructed the 300,000 tonnes FPSO hull in South Korea while AMEC built and integrated the 22,000 tonnes oil processing topsides facilities. Stolt Offshore designed and built the gas export pipelines, the production flow lines, water injection lines and the risers that connect the sub-sea facilities to the FPSO.

SBM and Technip completed all the mooring and installation of the FPSO and SBM Loading Buoy together with the gas lift risers, well jumpers, control umbilicals, production manifolds, and subsea trees. Vetco Gray supplied the sub-sea wellheads, manifolds and control systems.

Militant Attack

Oil and gas production was first interrupted in Bonga in June 2008 when Shell shut down production from the offshore field, after members of the then most powerful militant group in the Niger Delta Movement for the Emancipation of the Niger Delta (MEND), fired at the facility during an unsuccessful attempt to destroy production infrastructure.

During the attack, an American oil worker, Capt. Jack Stone was captured on a supply vessel in the area by the militant group.

The incident shook the entire oil industry as it was surprising how the militants could penetrate an offshore facility, 65miles away from land.

MEND’s spokesman, Gbomo Jomo, claimed that the main computerised control room responsible for coordinating the entire crude oil export operations from the fields was the main target of the group.

“Our detonation engineers could not gain access to blow it up but decided against smoking out the occupants by burning down the facility to avoid loss of life. Our next planned attack on the oil field would be deadly. We therefore ask all workers in the Bonga field to evacuate for their safety as the military cannot protect them,” he said.

“The location for today’s attack was deliberately chosen to remove any notion that offshore oil exploration is far from our reach. The oil companies and their collaborators do not have any place to hide in conducting their nefarious activities. We use this opportunity to ask the oil majors to evacuate their expatriate staff from Nigeria until the issues in the Niger Delta have been addressed and resolved,” he added.

However, the attack was unsuccessful and after shutting down for few days as a precautionary measure, Shell resumed production in the field.

Maintenance Work
On February 28, 2011, production at Bonga field was again interrupted when SNEPCo shut the FPSO vessel for the first five- yearly mandatory turnaround maintenance.

As part of the efforts to ensure that the routine maintenance met global oil and gas standard, the Department of Petroleum Resources (DPR) hired Lloyds as a consultant to certify the exercise.

SOURCE ARTICLE

By THE NEW YORK TIMES January 2, 2012, 11:39 am

Reuters: The oil-encrusted Atlantic beach in Orobiri, Nigeria, on Saturday.

Nigerian villagers and environmental groups say that oil washing up on the coast must be from the recent Royal Dutch Shell loading accident, which caused the biggest offshore spill in the country’s waters in 13 years. Shell denies that the oil is from the spill, saying its dispersal efforts prevented any of that crude from washing ashore. [Reuters]

SOURCE ARTICLE