05 May 2012, Sweetcrude, LAGOS – Shell announced Friday a significant cut in its Nigerian oil production due to pipeline damage caused by theft, and warned that it might not meet contractual obligations as a result.
“The Shell Petroleum Development Company of Nigeria Ltd (SPDC) declared force majeure on outstanding cargoes of Bonny Light with effect from noon (1100 GMT) today, 4th May 2012,” a statement said.
“The action is due to production deferment caused by incessant crude theft and illegal bunkering on Nembe Creek Trunkline.”
A shutdown of the line for repairs by the Anglo-Dutch oil giant will cut output by 60,000 barrels per day in Africa’s largest crude producer, it said.
Shell did not give a date for when the repairs would be complete.
SPDC is Shell’s Nigerian local arm. The trunkline is a major conveyor of production to the Bonny export terminal in southern Nigeria.
A declaration of force majeure frees a company from commercial obligations due to circumstances beyond its control.
Oil theft has been a growing problem in Nigeria, and Shell chief executive Peter Voser said last month that there have been estimates that 150,000 barrels of oil and condensate is stolen in the country each day.
The theft often causes damage to pipelines, resulting in production halts.
“The oil theft and illegal refining is at large scale, with tank farms, barge building operations and barges shuttling crude to waiting tankers offshore,” Voser had said.
Nigeria has been producing between 2.0 and 2.4 million barrels per day in recent months.