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Nigeria violence pushes oil price to new record

The Times: Nigeria violence pushes oil price to new record

“Shell said it had removed some 200 non-essential workers from an area close to Soku, where the oil company has a hub facility that collects gas from oil wells across the region for delivery to Nigeria LNG, one of the world’s biggest gas liquefaction plants, located on Bonny Island.”

By Carl Mortished, International Business Editor

September 28, 2004

THE price of crude oil made new records yesterday, flirting close to $50 per barrel in New York as traders reacted to continuing violence in oil- producing states, including Nigeria.

Rising tension in the Niger Delta renewed concerns about attacks on oil infrastructure in one of the larger Opec producer states. Anxiety about the repeat of last year’s production shutdowns in Nigeria and the killing of a French national in Saudi Arabia over the weekend sent the crude price climbing to $49.74 a barrel in New York, a record high for the Nymex light, sweet crude forward contract.

In London, the price of Brent crude also reached a new record, rising by almost a dollar a barrel to $46.24 amid continuing anxiety about security of supply. In later trading, Brent crude for November delivery retreated below $46 although traders were betting that the price per barrel would break through the psychological barrier of $50 per barrel before speculators began to unwind their positions.

Oil companies in Nigeria were evacuating staff from areas of River State in the Niger Delta, fearing clashes between government troops and rebel militias.

Shell said it had removed some 200 non-essential workers from an area close to Soku, where the oil company has a hub facility that collects gas from oil wells across the region for delivery to Nigeria LNG, one of the world’s biggest gas liquefaction plants, located on Bonny Island.

A spokeswoman for Shell said the company had suffered no loss of production. “The action was purely a safety measure. We noticed a large movement of troops and we had to move some 200 non-essential staff from the Soku facility,” she said.

Reports from Nigeria quoted a rebel leader belonging to the Ijaw tribe, accusing Agip, the Italian oil producer, of lending helicopters to the Nigerian Government and threatening retaliation. ENI, the parent company of Agip denied the accusation.

Outbreaks of violence between the Ijaw and government troops caused the temporary shutdown of 40 per cent of Nigeria’s crude output. The African state is currently capable of producing about 2.5 million barrels per day but its importance in transatlantic oil trade goes beyond the number of barrels it can generate. Nigeria produces a high-quality crude valued by refiners for its low-sulphur content and its suitability for conversion to petrol. Much of Nigeria’s output is sold to US refiners, which are currently short of crude supplies following the evacuation and shutdown of Gulf of Mexico oil production platforms in the recent hurricanes.

Assets of Yukos, the Russian oil giant threatened with a $7 billion tax bill, could be sold for $15 billion, a deputy energy minister said yesterday. Speaking at a conference in Moscow, Ivan Matserov said that a sale would be a “normal, natural conclusion of this process”. The minister did not specify whether the $15 billion price referred to Yuganskneftegaz, the Yukos subsidiary which accounts for 60 per cent of its output and is currently being valued by Dresdner Kleinwort Wasserstein, the investment bank, with a view to a bailiffs’ sale.

However, the deputy minister’s comments coincided with a signal from Yuri Trutnev, the Natural Resources Minister, that a review of the Yuganskneftegaz production licence would be concluded this week. The minister has previously threatened the removal of the licence, a move that would severely curtail the unit’s potential value.

The suggested $15 billion for Yuganskneftegaz would put it beyond the reach of most Russian companies and analysts believe it unlikely that the Kremlin would entertain a foreign bidder.

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