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The Times: Attacks hit Shell oil production in Nigeria

By Carl Mortished, International Business Editor
VIOLENCE in the Niger Delta has forced Shell to shut down almost half of its Nigerian oil production, a loss of output that threatens the Dutch multinational’s efforts to meet its volume targets.
Shell has shut down its Forcados oil export terminal after attacks on installations in the Eastern Delta over the weekend by a militant rebel group that also took hostage nine foreign workers employed by a Shell contractor.
Fears of further sabotage caused Shell to stop production at its offshore EA field, close to the Forcados oil terminal. The combined closures, including the loss of oil from previous damage to pipelines, leaves Shell and its venture partners with the loss of 455,000 barrels per day, almost one fifth of Nigeria’s total oil output.
The escalating loss of barrels will be a setback to Shell, which is struggling to keep its annual output within a range of 3.5 million to 3.8 million barrels per day.
The violence prompted a surge in the price of crude oil on global commodity markets, reversing a recent weakening trend. The price of Brent crude in London gained almost $1.50 per barrel to $61.35.
Rising stocks of crude in the Atlantic basin and evidence that high prices are finally curbing demand have caused the oil price to weaken, but prolonged Nigerian disruption could keep a floor under the cost of crude.
America is a keen customer for Nigeria’s 2.5 million daily barrels of high-quality crude. Nigerian blends are valued for their high gasoline content and lack of impurities. They are easier to distill into high- specification road fuels than alternative crudes from Saudi Arabia, Venezuela or Russia.
The Movement for the Emancipation of the Niger Delta claimed responsibility for the weekend sabotage and hostage-taking, which included an attack on a boat used by Willbros, a United States-based Shell contractor, to lay pipe and the destruction of a pipeline linking oilfields with the Forcados terminal. A spokesman for Shell also indicated that there had been a fire at the Forcados terminal, forcing them to shut the facility. The nine hostages include one Briton, three Americans, two Egyptians, two Thai and one Filipino national.
The rebels have threatened to kill President Obasanjo of Nigeria and remove all foreign oil companies from the Delta.
Insurrection, hostage-takings and violent attacks on oil facilities are a common occurrence in the Delta. However, they have increased in recent months at the same time as an increase in “bunkering”, the theft of oil from pipelines, which the Nigerian authorities blame on criminal gangs that in turn arm and finance the insurrection. Frustration with endemic poverty and corruption, which has prevented development of a non-oil economy in the Delta, has also encouraged the violence.

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