The Times: Nigerian troubles mount for Shell as workers are kidnapped

May 4, 2007
Carl Mortished, International Business Editor

Twenty foreign workers were snatched by kidnappers in the Niger Delta yesterday as Royal Dutch Shell, a major oil producer in the region, said that it had lost 188,000 barrels per day of Nigerian production in the first quarter of the year and gave warning that its global hydrocarbon output for the year would be depressed because of the continuing security problems at its operation in Nigeria.

Shell raised its first quarter earnings by 14 per cent to $6.9 billion (£3.47 billion) as the strength in its refining and chemicals businesses more than offset weak oil output and lower prices.

Peter Voser, Shell’s finance director, said that the company was attempting to restart operations in the troubled Western Region of the Delta where the Dutch company has abandoned facilities and declared force majeure at the Forcados oil export terminal because of the continuing violence. The loss of oil production in Nigeria has worsened by some 78,000 barrels per day over the past year as violence increased up to the recent elections. Some 10,000 barrels per day of oil production have resumed but overflights of the area by Shell revealed extensive theft of equipment.

“We see considerable damage to our facilities. Restoring production fully will take time,” he said.

Shell’s oil and gas output fell 6 per cent in the first quarter to 3.5 million barrels per day, affected in part by the warm winter in Europe which affected gas sales. Mr Voser gave warning that oil and gas output for the year would be at the lower end of the target range of 3.3 million to 3.5 million bpd.

Shell’s shares gained ground, rising 2 per cent as the market took comfort from better than expected profits that were lifted by strong refining, chemical and retail margins.

Profits from the refining and marketing business rose by 12 per cent to $1.48 billion as the company benefited from the strength of the US refining environment where strong demand and a spate of refinery shut-downs have tightened supply.

Shell was operating at a lower level of 85 per cent availability, mainly because of a planned maintenance shut-down at its massive Deer Park facility in Texas and expects the group’s level of activity to rise to 90 per cent of capacity in the second quarter.

Mr Voser said Shell was continuing to seek opportunties in Iraq, in particular plans to to put together a gas business.

Shell’s headline profit of $6.9 billion included an exceptional gain of $404 million from the sale of securities by its captive insurer.

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article1744411.ece

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