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Financial Times: Nigerian unrest forces Shell to cut capacity

By Dino Mahtani in Lagos
Published: May 15 2007 19:31 | Last updated: May 15 2007 19:31

Royal Dutch Shell, Nigeria’s largest oil producer on Tuesday said it had been forced to cut 170,000 barrels per day of oil production after villagers demanding money occupied a major pipeline.

The protest had begun on May 10, with villagers shutting down a major facility along the pipeline. It brings the total amount of oil shut down through unrest, sabotage and militant action up to 980,000 bpd, or just under a third of the 3m bpd capacity of Africa’s largest oil producer.

Attacks on oil facilities have spiked since the end of national elections last month, which were plagued by widespread rigging and were adjudged “not credible” by international observers. The main militant group operating in the oil producing Niger Delta has also said it has unleashed a month of “mayhem” on the industry, to demonstrate its opposition to Nigeria’s ruling party, which won a landslide victory in the polls.

The latest Shell shutdown – which means roughly half of all the oil produced by the company in Nigeria is shut in – seems unrelated to the activities of the militant Movement for the Emancipation of the Niger Delta, but is a further blow to the industry.

Last week, Mend launched attacks on pipelines feeding the Brass export terminal in Bayelsa state, shutting down almost 100,000 bpd of production and forcing Italian multinational ENI to declare a force majeure, industry terminology for a self-exemption on export commitments. Traders now expect Shell to also declare a force majeure.

The disrupted pipeline passes through the region of Ogoni, in the eastern delta, where Shell was forced to suspend production 14 years ago in the wake of civil unrest. The Ogoni unrest came to symbolise the plight of the delta’s largely impoverished people. The execution of Ogoni leader Ken Saro-Wiwa in 1995 by the then military government served to fuel militancy.

“As you know we left Ogoni land in 1993, and oil and gas infrastructure are [a] fairly easy target for those determined to do something. It will be very difficult to patrol the entire length of a major trunkline,” said one Shell spokesman.

Sources close to Ogoni leaders said they expected the disruption to last a while. The spokesman said the company was in talks with the community leaders, though was as yet unable to ascertain their demands.

Oil companies have detailed at least 880,000 bpd in lost production, but government officials say it could be as high as 980,000 bpd.

Copyright The Financial Times Limited 2007

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