allAfrica: Shell May Delay 480,000 BPD Output

This Day (Lagos)
NEWS
September 6, 2006

By Crusoe Osagie
Lagos

Uncertainty now hangs over the resumption of production of about 480,000 barrels per day (bpd) of crude oil production by Shell Petroleum Development Company (SPDC) in the Warri area of the Niger Delta, following threats of reprisal attacks by militant groups over the killing 12 militants in a recent shoot-out with soldiers.

Shell had shut-in the huge volume of oil production (which is about 21 percent of Nigeria’s oil production average of 2.4 million bpd) since last February, following the outbreak of violence in the region and a substantial damage to the company’s production facilities.

THISDAY checks reveal plans by Shell, Nigeria’s biggest oil producer, to commence repairs of the vandalized facilities ahead of the resumption of production.

Company officials however, said that in the light of latest development in the Warri area, it might not be safe to go ahead with the plans. “We have not been operating in that area since February. We were however, making plans to go back and this has happened. It is a matter of safety strategy,” a senior official said.

He added: “We have not been operating in that area. I don’t think we will be going ahead with plans to resume production for now given the recent realities”.

The NNPC/Shell joint venture might have lost over $6.3 billion (N806.4 billion) to the forced closure of the oil production facilities since the violence erupted. NNPC owns 55 percent equity in the joint venture and Shell, 35 percent. Other partners currently bearing the losses are Elf and Agip.

The delay in resumption of operations also means that plans to substantially increase gas supply to thermal power stations operated by Power Holding Company of Nigeria (PHCN) in the area, namely the Lagos Egbin Power Plant, Sapele Thermal Power station and the Delta IV Power station, will remain elusive.

Electricity generation by PHCN had dipped from around 3,200 megawatts early this year to around 2,000 MW following a sharp drop in gas supply to the power stations.

Soldiers on the Joint Military Task Force detail to restore order in the violent-prone Niger Delta had on August 20, 2006, engaged a convoy comprising militants and other Bayelsa State government officials who had gone to free a kidnapped Shell employee.

Only last week, Shell had completed the repairs of an oil pipeline in Bonny shut since last month, allowing 180,000 barrels per day of shut Bonny Light oil production to resume.

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