FG loses N2.1bn daily as Shell shuts oil pipeline

Posted by News Express | 25 November 2014 | 3,551 times

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The Federal Government has suffered a setback in terms of foreign exchange generation as Shell has shut its Bonny pipeline in the Niger Delta because of oil leak.

The development recorded over the weekend has culminated in a loss of about 180,000 barrels per day, valued at $13.5m (N2.1bn) per day at the current price of about $75 per barrel.

The nation, as available records indicate, is producing less than 2.5 million barrels per day, including condensate. Investigation showed that Shell has started mobilising its personnel for maintenance of the facility but it was not clear when rehabilitation would be completed.

The firm has however, not yet declared a force majeure to protect it against any liability with oil buyers and international traders.

A Shell spokesperson said: “SPDC is investigating the source of a leak at Okolo Launch in Eastern Niger Delta which occurred near the 24-inch and the 28-inch TNP (Trans-Niger Pipeline).”

“The leak occurred near where one of our contractors was preparing to remove crude theft connections on the line. On noticing the leak on November 22, we deployed booms and also shut in the 28-inch TNP.”

Shell, which has recorded numerous incidents in the past noted that crude oil theft, sabotage and illegal refining are the main source of pollution in the Niger Delta.

“In 2013 the Nigerian government estimated crude oil theft and associated deferred production at over 300,000 barrels of oil per day (bpd),” it stated.

It stated that intentional third-party interference with pipelines and other infrastructure was responsible for around 75 per cent of all oil spill incidents and 92per cent of all oil volume spilled from facilities operated by the Shell Petroleum Development Company, SPDC, over the last five years (2009-2013).

“Much greater volumes of oil are discharged into the environment away from SPDC facilities through illegal refining and transportation of stolen crude oil.

In 2013 the number of spills from SPDC operations caused by sabotage and theft increased to 157, compared to 137 in 2012, whilst production losses due to crude oil theft, sabotage and related temporary shut-downs increased by around 75 per cent,” it stated.

According to the oil giant, on average around 32,000 bpd were stolen from its pipelines and other facilities, whilst the joint venture lost production of around 174,000 bpd due to shutdowns related to theft and other third-party interference.

In March this year, Shell said it lost nearly $1bn in 2013 through theft and various disruptions to its oil and gas operations.

Meanwhile, the price of Brent which is usually used to benchmark the prices of other crude oil grades has hovered at $80 per barrel as members of the Organisation of Petroleum Exporting Countries, OPEC, prepare to meet on Thursday in Vienna, Austria.

Member states of the cartel, including Nigeria are under serious pressure to cut output during the Austria meeting, which was called to review the volatile market and adopt measures that can assist to achieve stability. At present, opinion is divided on the proposed oil cut.

While some members seem to be in favour of it, others are said to be opposed to it. “Many members are opposed to the cut because the market share would likely be taken up by others, especially the United States,” a source stated.

The chairman of International Energy Services Limited, Dr. Diran Fawibe, stated in a telephone interview that the lull in the market has come at the right time.

“It is better for the price to fall now that the Federal Government and others are still working on the budget than later when work on the budget might have been completed,” he stated.

He said the government and others should review their decisions in the light of current developments at the global oil market in order to produce a good budget for the nation.

Fawibe said it would be clearly unrealistic to base the budget on $78 per barrel because the United States of America has the capacity to influence the market through increased production and supply.

•Source: National Mirror. Photo shows Petroleum Minister Diezani Allison-Madueke.

Source: News Express

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