*Loses 44% of oil pumped through Trans Niger Pipeline
Shell Petroleum Development Company of Nigeria Limited (SPDC) has said loadings of its key crude grade, Forcados, are on force majeure due to some operational issues at the export terminal, Shell said on Monday.
Force majeure was declared effective August 13 due to “the curtailment of production and suspension of export operations as a result of some sheen noticed on the water around the loading buoy,” Shell said in a statement.
According to S&P Global Platts, Forcados is a gasoil-rich sweet crude blend and is one of Nigeria’s top export grades. Output has averaged around 200,000 barrels per day (bpd) over recent months compared to its full capacity of 250,000 bpd.
Nigeria oil output has been hampered by operational and technical problems in the past few months.
Key crudes such as Bonny Light, Escravos, Forcados, Qua Iboe have all faced production issues due to operational and technical reasons.
Forcados, which relies heavily on oil pipelines, has also faced persistent sabotage in the past few months.
S&P Global Platts Analytics expects Nigeria to be one of the largest risks for OPEC+ production growth in end-2021.
“We forecast August crude supply to average 1.36 million bpd down from 1.48 million bpd in July and 1.66 million bpd as recently as February,” it said in a recent note.
“Our outlook for growth to 1.75 million bpd by December faces notable uncertainty, even without rising risks of coordinated attacks on oil infrastructure.”
The Managing Director, The Shell Petroleum Development Company of Nigeria Limited and Country Chair, Shell Companies in Nigeria, Mr. Osagie Okunbor, had at the 2021 Nigeria Oil and Gas conference held in Abuja in July, lamented the quantity of oil the company loses to oil theft and pipeline vandalism in the Niger Delta.
According to him, about 44 per cent of the oil pumped through its Trans Niger Pipeline (TNP) is lost before it gets to the terminal due to breaches on the pipeline. The breaches result in quantum loss of oil and environmental ruin. He spoke in support of the National Assembly to ensure through the Host Community law that host communities are fully involved in protection of oil assets and facilities in their communities.
Okunbor said: “It is important that our hosts play a central role particularly in our onshore of the Joint Venture (JV) operations. The host communities play a central role in the sustainability of our operations, not just in terms of protecting those assets that lie within their domains.
“This is because, once one of those assets is breached in any sense, it is not just the environmental consequences that you see, it is also the deferred production that result from this. I can tell you that our most important pipeline in the Delta – the Trans Niger Pipeline (TNP) and the reconciliation factor, which is the difference between what you put into the pipe and what arrives at the terminal, the reconciliation factor is around 56 per cent, which means 44 per cent of what goes into that pipeline disappears.
“This is material not just for Shell but it is even more material for the country. As you know, 90 per cent or more of oil that is produced in JV goes back to this country either via taxes or royalties, among others. I’m talking about the net after cost, so this country bleeds a bit.”
Growing threats by militants to renew attacks on oil infrastructure in the restive Niger Delta also pose a huge concern for Africa’s largest oil producer, Platts said.
Nigeria has the capacity to produce around 2.2 million – 2.3 million bpd of crude and condensate, but production has averaged only around 1.62 million bpd in the first seven months of 2021, according to Platts estimates.
Meanwhile, the oil market is still weighing the latest statements from the White House regarding OPEC+ crude oil production. The United States wants OPEC+ to increase output, even as Russian gas supplies remain constrained; with record-high power prices in Europe.
