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UpstreamOnline: Shell Nigeria sees 2005 output fall

By Upstream staff

Supermajor Shell’s Nigerian venture sees a “challenging” 2006 after its oil production fell 8% last year because of project delays and natural output declines.

Shell Petroleum Development Company production averaged 924,000 barrels per day last year, down from 2004’s one million bpd, the company said in its Shell Nigeria Annual Report recently posted on its website.

Oil output in Nigeria, the world’s eighth-largest exporter, is suffering further in 2006 because of militant attacks. The supply loss helped oil prices hit a record high of $78.40 a barrel earlier this year, Reuters reported.

“A difficult challenge we face is the security situation in the Niger delta,” SPDC managing director Basil Omiyi said in the report. “It deteriorated significantly towards the end of the year and has continued into 2006 with hostage taking and destruction of facilities.”

Worsening security in the oil-producing Niger delta threatens staff safety, harms the environment and may affect the region’s social and economic development, SPDC said.

“Given this, our operations in 2006 will, no doubt, be challenging,” Omiyi said.

Crude oil theft remains a “major concern” but the average loss was cut in 2005 to between 20,000 bpd and 40,000 bpd from between 40,000 bpd and 60,000 bpd in 2004, the report said.

Shell has a total of 495,000 barrels of oil equivalent per day of Nigerian production shut at fields that it operates at present, mostly after militant attacks.

Jeroen van der Veer, Shell’s chief executive, said in July he did not expect the production shut by the attacks to make a “significant” recovery this year.

Earlier today, Shell said it hoped to lift a force majeure on exports of Bonny crude from Nigeria in the “near future” but did not give a specific timeframe.

Shell had declared force majeure – a release from honouring contracts – on the exports for July and August after a pipeline leak cut production. Most of the shut output later resumed.

Shell owns 30% of Shell Petroleum Development Company. Sate-run Nigerian National Petroleum has 55%, Total 10% and Eni the rest.

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