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Royal Dutch Shell makes Nigeria production warning

By Jon Gambrell on October 23, 2012

LAGOS, Nigeria (AP) — Royal Dutch Shell PLC warned Tuesday that it won’t be able to make its estimated production for two types of oil pumped from Nigeria, largely blaming attacks on its pipelines by thieves wanting to steal crude.

Shell said in a statement it had declared a “force majeure” warning Friday for shipments of its Bonny and Forcados crude oil — meaning it is impossible for the company to cover the promised supply from the field. Those two types of crude represent a major chunk of the oil produced in Nigeria by Shell, long the dominant foreign oil company in the West African nation.

While flooding had affected its Bonny operations, Shell said attacks on the pipelines of its local subsidiary caused the majority of its problems. A ship containing fuel stolen from its Bomu-Bonny pipeline caught fire alongside the pipe, causing damage, Shell said. Attacks also occurred on its Trans-Forcados and Brass Creek pipelines, the company said.

The company said it was working to repair the pipelines, but gave no estimate about when the lines would be running at capacity again.

The thefts, locally called “bunkering,” see crude later get sold into the black market or cooked into crude gasoline or diesel at makeshift refineries that dot the oil-rich Niger Delta. Shell officials previously have said as much as 150,000 barrels of crude a day is being stolen.

The bunkering likely continues because those in power in Nigeria personally benefit from the theft. A U.S. diplomatic cable leaked last year quoted a Nigerian official as saying that politicians, retired admirals and generals and the country’s elite all take part.

Shell produced about 800,000 barrels of oil a day last year, with numbers rising as militancy in the region dropped off after a government-sponsored amnesty program in 2009. However, violence and kidnappings still occur in the region about the size of Portugal.

Nigeria, which produces more than 2 million of barrels of oil a day, is a top crude oil supplier to the U.S.



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