Oil price fears following rebel attacks on Shell

Daily Telegraph

Nigerian militants attacked three Shell pipelines in just 24 hours over the weekend – sparking concerns that the escalating volatility could drive up oil prices.

By Rowena Mason
Published: 8:06PM BST 21 Jun 2009

Shell would not say whether operations had shut down in the Niger Delta region as the company begins an investigation into the scale of the damage.

But the oil giant confirmed that there have been three attacks as part of an ongoing sabotage campaign.

The Movement for the Emancipation of the Niger Delta (MEND) claimed to have struck Shell’s pipelines at Adamakiri and at Kula.

This was followed by a more unusual attack on an oilfield in shallow water, which the rebels claimed was “engulfed in fire”.

Shell’s joint venture with the French oil giant Total, the Italian company Agip and the Nigerian government is known to be affected.

The price of oil rose to an eight month peak above $70 partly as a result of political instability in both Nigeria and Iran. Both countries are key members of the Organisation of Petroleum Exporting Countries (OPEC), the oil cartel.

Olivier Jakob, an analyst at Petromatrix warned of “legitimate geopolitical concerns” over the past couple of days for oil traders. “We will need to keep an Iranian risk premium for the weekend and to it we will add a Nigerian risk premium,” he said on Friday.

The latest attack follows two other incidents last week, which caused Shell and Agip to halt some production capacity.

Nigeria is the world’s eight largest oil exporter, but unrest in its Delta region has reduced output sharply by a third in the last three years – causing it to be overtaken by Angola.

According to the June report of the International Energy Agency, the country now produces just 1.8m barrels per day, down from 2.6 million barrels in 2006.

A spokesman for Shell in the Netherlands, said the extent of any damage was still unclear. “We can confirm that there have been three attacks against installations in the eastern part of the Nigerian Delta. We are currently investigating the impact on the facilities, operations and the environment.”

Chevron, the US energy company, shut down operations around the Delta after the militants’ first pipeline attack last month, halting around 100,000 barrels per day of output.

In June last year, militants attacked Shell’s 200,000-barrels-a-day deep offshore platform, in Nigeria which had been previously considered too difficult to reach.

The militants are fighting the large Western oil companies and Nigeria’s government for a larger share of revenue from the oil-rich region.

In a series of emailed statements to news outlets, they also made further threats towards Chevron over the weekend. The fighters warned that the oil giant would “pay a price in double measure” for allowing Nigeria’s military to use its air strip for jet fighters and helicopters.

The country’s army has been trying to flush the rebels out of the affected region.

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