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Nigeria: Shell can’t meet oil production target

7 May 2010 By JON GAMBRELL (AP)

LAGOS, Nigeria — Royal Dutch Shell PLC announced Friday that it would not be able to fulfill some of its oil production contracts after a fire on one of its major pipelines in Nigeria that the company has blamed on thieves.

Shell issued a statement saying the fire and leaks on its subsidiary’s Trans Niger pipeline forced it to declare “force majeure” on production of Bonny Light oil for May and June — meaning it is impossible for the oil major to cover the promised supply from the field.

Shell “is working hard to repair and return the line to production as soon as possible,” the statement read.

Typically, Shell refuses to release production figures outside of company reports. However, industry officials in the past have estimated that more than 100,000 barrels of oil flow through the pipeline a day.

The pipeline runs through the oil-rich Niger Delta, a maze of creeks and swamps running through 20,000 square miles of southern Nigeria.

The company’s statement said that the areas where thieves struck the pipeline sat within Ogoniland, an area Shell withdrew from in 1993 while it was under attack from activists who were sabotaging the oil wells and beating Shell staffers to get them to leave the region.

Shell “suspended production in Ogoniland since 1993,” the statement read. “However, some of our facilities, such as the (pipeline) pass through the area.”

Shell remains the dominant oil company in Nigeria and has been demonized both by environmentalists and by community activists who want more of the former British protectorate’s oil wealth to flow back into the poverty-stricken delta.

Shell also was accused in a U.S. lawsuit of playing a role in the 1995 executions of Ogoniland activist Ken Saro-Wiwa and other civilians by Nigeria’s former military regime. Shell reached a $15.5 million settlement to end the lawsuit in June, but acknowledged no wrongdoing.

Shell’s Nigerian subsidiary faces regular attacks by militants who have targeted pipelines, kidnapped petroleum company workers and fought government troops since 2006. Shell’s chief executive officer has even hinted that the company can no longer depend on Nigeria as a profit-maker, despite its 50-year history in the country.

Such production disruptions in Nigeria have affected global oil prices in the past. Nigeria was the No. 4 oil exporter to the U.S. in February, sending about 896,000 barrels of crude a day to the U.S., outpacing even Saudi Arabia.

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