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Nigerian Militants Attack Oil Rig, Prompting Shell to Cut Production

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Nigerian Militants Attack Oil Rig, Prompting Shell to Cut Production

By ANGELA HENSHALL and SPENCER SWARTZ
June 19, 2008 7:33 a.m.

LONDON — Royal Dutch Shell PLC said Thursday it has been forced to shut-in 225,000 barrels a day of output in Nigeria after an attack on its floating production facility about 75 miles offshore.

The attack is a big blow to Shell, which said it had suspended all production at its Bonga field while it investigates the attacks. The overnight assault is also worrying to the oil industry because it is the first time militants have successfully ventured miles offshore and taken out output at a major offshore oil field.

“All production has been shut in at Bonga and the company is investigating the situation to find out what happened,” said Shell spokesman Rainer Winzenried.

He said it is still to early to know whether it will be necessary for the company to declare force majeure on exports, which would provide Shell with legal protection if it wasn’t able to meet its contractual obligations.

A senior Nigerian oil official said the government was dispatching naval boats into the Gulf of Guinea to boost protection of offshore oil fields, where the bulk of new Nigerian oil production is coming from.

Many oil companies, including Chevron Corp., have been developing big Nigerian offshore oil fields, not only because of the Gulf of Guinea’s hydrocarbon potential, but also to escape the violence and militant attacks at onshore locations that have crippled the West African country’s oil output over the past two years.

With the latest attacks, total shut-ins in Nigeria caused by militant attacks account for between 800,000 to one million barrels per day of Nigerian capacity. That represents about half of the country’s effective pumping capacity.

Crude-oil futures prices moved higher on the news, the latest development stoking market unease at the health of global crude oil supply flows. Light, sweet crude for July delivery rose 23 cents to $136.91 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. (See related article.)

Handicapped Nigerian production has been a contributor to prices reaching record highs near $140 a barrel this year. The West African country’s light, sweet crudes are highly prized by refiners given their high gasoline and distillate products yield.

The restrictions to Nigerian output has come at a time when the markets are increasingly concerned over whether global crude-oil supplies will be able to keep up with soaring demand, particularly from countries in Asia and the Middle East.

–Nick Heath and Lananh Nguyen in London contributed to this article.

Write to Angela Henshall at [email protected] and Spencer Swartz at [email protected]

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