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Oil Nears $120 on Nigeria Unrest: paid attacks in Nigeria help fund huge retention payments to flawed Shell executive directors

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THE WALL STREET JOURNAL: Oil Nears $120 on Nigeria Unrest

By GUY CHAZAN and NEIL KING JR.
April 29, 2008; Page C12

An escalation in attacks by militants in the Niger Delta and a strike by Exxon Mobil Corp. workers are playing havoc with oil production in Nigeria at a time when worries about tightening global supply have sent the price of benchmark crude close to a record $120 a barrel.

Separately, a major North Sea oil pipeline that was forced to shut because of a strike at a refinery in Scotland isn’t expected to be fully operational until the end of the week, further fueling uncertainty.

Exxon said its Nigerian production was closed, and has declared force majeure, meaning it is unable to meet its contractual obligations for crude deliveries — a sign of the acuteness of the Nigeria crisis.

The strike is costing Exxon and world markets some 800,000 barrels a day in output. The North Sea interruption has cut another 700,000 barrels a day from the market. Global demand is about 87 million barrels a day. Exxon said it wouldn’t speculate about the length of the closure in Nigeria or how long it would take to restart.

Crude oil for June delivery rose 23 cents to settle at $118.75 a barrel on the New York Mercantile Exchange. Earlier Monday, crude rose to an intraday record of $119.93. Analysts said the cuts in output from the U.K. and Nigeria are particularly important because there is high demand now for the lighter, more easily refined oil the two regions produce.

Oil traders and analysts point to Nigeria and continued skittishness over the U.S. dollar to buttress the argument that the market is predominantly bullish and that prices could keep rising. Some traders are predicting that, barring a significant shift in global supply or demand, U.S. benchmark crude could exceed $150 a barrel by the end of the year.

In the U.S., the high price of fuel is starting to ripple through the economy. Hundreds of truckers angry over soaring diesel costs poured into Washington Monday and clogged traffic.

The trouble in the Niger Delta is particularly troubling for Royal Dutch Shell PLC, which has long been under pressure to sort out its problems in Nigeria. Three rebel attacks have assailed Shell’s pipelines in the West African country during the past 10 days.

Though Nigeria is Africa’s largest oil producer and No. 11 in the world, its prospects have been harmed by clashes between government forces and rebels of the Movement for the Emancipation of the Niger Delta. Militants have kidnapped oil workers and attacked infrastructure, while the Nigerian government has fueled instability by saying it wants to renegotiate contracts with oil firms.

Shell took a $716 million write-down related to its Nigerian operations last year, blaming unrest and the Nigerian government’s failure to pay its share of funding for oil joint ventures.

In a statement Monday, MEND said its attack on a pipeline last Thursday had forced Shell to cut production by 350,000 barrels a day. A Shell spokesman declined to comment. If true, that would mean that roughly 1.8 million barrels a day was shut in — nearly three-quarters of the country’s production capacity. Shell already had been forced to shut in 169,000 barrels a day of production after another attack earlier this month. A further 470,000 barrels a day of Nigerian production has been shut in since 2006 amid unrest.

Meanwhile, a two-day strike at the Grangemouth refinery in Scotland forced the closure of a major pipeline that transports 700,000 barrels a day of North Sea crude — just under half the U.K.’s total production. Workers were expected to return to work Tuesday. But BP PLC, which owns and operates the Forties pipeline, said getting it running after the weekend disruption will take as long as four days.

Write to Guy Chazan at [email protected] and Neil King Jr. at [email protected]

http://online.wsj.com/article/SB120936783991649119.html

Headline by John Donovan of www.royaldutchshellplc.com

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

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