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Lloyds List: Nigeria oil exports hit by Shell shutdown

Anglo-Dutch firm calls force majeure on its Bonny terminal after militant attacks cause pipeline leaks, writes Martyn Wingrove, Lloyds List
Published: Jul 28, 2006

A QUARTER of Nigeria’s tanker export capacity has been shut down after Royal Dutch Shell called force majeure on its Bonny August loadings and kept its Forcados and EA terminals closed.

A pipeline leak on the country’s second largest onshore oilfield in the eastern Delta has closed down 180,000 barrels of production a day, forcing Shell to announce that it cannot honour its export contracts from the Bonny terminal.

More than 850,000 barrels a day of Nigeria’s production capacity is off line due to militant attacks and pipeline leaks on Shell and Agip facilities. The latest pipeline problem also shuts in 30,000 bpd of Chevron’s output.

Nigeria, Africa’s largest producer and a key member of the Organisation of Petroleum Exporting Countries, has an output capacity close to 3m bpd but is only producing around 2.1m. Shell Petroleum Development Co, where Shell has a 30% interest, has up to 657,000 barrels a day of production offline from the Bonny, EA and Forcados terminals.

Italian oil major Agip has closed down the 200,000 bpd Ogbainbiri flow station after local youths entered the site and closed down the pumps. Its output is usually exported through the Brass tanker terminal.

Demand for tanker loadings in Nigeria will fall by almost one suezmax a day through August until Shell and Agip can restart their production.

A spokeswoman at Shell confirmed that force majeure continued at Forcados and EA in the western Delta but exports continue through the company’s Bonga deepwater project and Exxon- Mobil-operated Erha.

Force majeure was called on Bonny exports after Shell found a leak from the Sanbarth-Krakrama pipeline into the Nemba creek and shut it down a week ago.

‘We do not know the cause of the leak but hope to have it repaired fairly soon. It usually takes a few weeks,’ said Shell chief executive Jeroen van der Veer.

‘For the rest of the shut-in production we expect some time this year to get some of this back, but it will not be significant. We need to do repairs and this takes time.’

This Bonny incident and the closure of EA and Forcados means Shell’s production levels this year will drop by more than 5% to around 3.4m bpd, Mr van der Veer confirmed.

The oil company had higher than anticipated earnings at $6.3bn but Nigerian problems and closure of Gulf of Mexico facilities after hurricanes meant output levels were down to 3.25m bpd.

Oil prices shot up yesterday close to $75 per barrel following these incidents and continued fears of supply disruptions from Middle East tension.

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