A Review of the Nigerian Energy Industry

Shell insists on comfort letter for lifting Nigerian oil

13 October 2015, Lagos – The transparency gospel of the President Muhammadu Buhari administration appears to be garnering adherents among the international oil cpmpanies, IOCs, as Royal Dutch Shell has asked ship owners exporting its Nigerian oil to sign a “letter of comfort”, LoC, to guarantee it is not stolen.

ShellIn July, state-run Nigerian National Petroleum Corporation, NNPC, banned about 113 tankers from Nigeria’s waters, citing a directive from President Buhari, who wants to trace and recover what he calls “mind-boggling” sums stolen from the oil sector.

Last month, the NNPC lifted the ban but asked ship owners to sign a letter of comfort as “guarantee to indemnify” it against any illicit use of their vessel. This led some owners to reject pending bookings.

“Please be informed we expect LPG & Products ship owners to sign the NNPC LoC for any future Shell loading voyages,” the email said, referring to liquefied petroleum gas.

“Shell (is) putting (its) reputation on the table that warrants the cargo is not stolen and this should remove any concerns ship-owners have around bad title down the oil chain,” the email said.

Shell said it was looking to mitigate any negative impact that the requirement to provide the letter might have.

“What we are doing is to ensure that our business is not adversely affected by working with our own vessel owners to provide this letter in the legal language that everyone can live with,” Shell Nigeria country Chair, Mr. Osagie Okunbor said last week.

Traders said that oil companies, trading houses and tanker owners were ensuring actions taken by Nigeria to prevent oil theft did not affect the market. They said other companies and trading houses had drafted similar letters to ensure trading continued without disruption.

“I’ve not seen any vessels waiting around (outside oil loading terminals) because of the measures,” one trader said.


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