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Reuters: Shell inches back to Nigeria oilfields

Fri May 4, 2007 4:20 PM BST
By Tom Ashby

LAGOS (Reuters) – Royal Dutch Shell is inching back to Nigerian oilfields shut for over a year by militant attacks, but restoring lost output will take several months and may be set back by more violence, industry sources said on Friday.

Shell (RDSa.L: Quote, Profile , Research) pulled thousands of workers out of the western Niger Delta in February 2006 forcing a cut in oil production of 600,000 barrels per day (bpd), or one fifth of Nigeria’s total capacity.

The attacks set a new low for violence in the Niger Delta, where a decades-long insurgency has increasingly hit oil exports, contributed to surging world oil prices and affected government finances.

The company is now sending workers back to abandoned control stations and pipeline connectors in the remote swamps around the Forcados export terminal, and has discovered 700 km of pipeline stolen — just one item on a repair bill thought to exceed $2 billion (1 billion pounds).

Despite extensive theft and sabotage, one senior industry executive said some “quick wins” could restore about 200,000 bpd of Forcados output as soon as July, but opinion is divided on the timetable and some expect this to slip to September.

Another senior executive said: “I would take a pessimistic view. We are being very cautious. The priority is not to put lives in danger and that affects how quickly you can come back.”

The company has officially said only that “preparations for a restart are under way”, without providing a timetable.

Output from the nearby offshore EA field, which can reach 120,000 bpd, is on hold because of discord in nearby communities and technical issues. Shell has not yet restaffed the floating facility and one industry insider said it may need to be towed away for an overhaul that would take months.


The February 2006 attacks were coordinated by a militant group, the Movement for the Emancipation of the Niger Delta (MEND), which says it wants to halt exports completely in its campaign to secure regional control over the delta’s oil wealth.

MEND has consistently warned Shell against returning to the western delta, and staged two assaults on offshore oilfields this week in which 14 foreign workers were kidnapped. Eight were released unharmed on the same day.

Were MEND to strike again at a Shell facility in the western delta, the whole restart plan could be put on hold again, security sources said.

Some delta activists had expected violence to subside with the election of Umaru Yar’Adua in last month’s presidential poll, because vice president-elect Goodluck Jonathan is from the delta and he could bring a new initiative to the region.

But MEND denied this after kidnapping six foreign workers from a Chevron-operated (CVX.N: Quote, Profile , Research) oilfield on Tuesday.

“This attack is one in a series intended to embarrass the out-going regime,” the group said in an e-mail. “It is also a warning to the incoming government which we view as an extension of the present. We will continue with our struggle for justice until we achieve all our goals without exception.”

MEND’s agenda is popular in the delta, where most people live in poverty and without jobs despite the huge oil riches being extracted from their ancestral lands.

Nigerian crude oil is prized by consuming nations for its high quality, and traders keenly watch for any sign of Shell’s return to the western delta.

News that Shell was planning to export about 4 million barrels from the Forcados tanker terminal in June raised expectations of an imminent restart of production.

But Shell officials said the oil to be exported was produced before the attacks in February 2006. Industry sources say no exports of newly produced oil have yet been programmed for July.

“As soon as some bottlenecks are cleared we will have quite a few barrels, but we have not even asked for a quota yet,” a senior industry executive said, referring to Nigeria’s supply limits administered by the OPEC exporters’ group.

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