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Gulf Times: Nigerian unrest to last all year, hurting Shell

’Published: Wednesday, 1 March, 2006, 09:20 AM Doha Time
LONDON: Violence directed against Nigeria’s oil industry will last throughout 2006 because presidential elections are due next year, hurting Royal Dutch Shell Plc and other foreign oil companies, Citigroup Inc analysts said.
Shell’s Nigerian joint venture has halted 455,000bpd of production since February 19 following the kidnapping of Shell contract workers and attacks by militants on an export terminal and an oil pipeline in the Niger River delta.
“We expect these disruptions to be a continuous feature of 2006 oil markets,’’ Citigroup analysts including James Neale and Jonathan Wright said in a note to clients yesterday. “Shell is the most leveraged and may need to consider asset swaps to dilute its exposure – both financially and politically.’’
Shell, Europe’s second-largest oil company, is the biggest foreign producer in the country. Nigeria represents Shell’s major growth region until the turn of the decade, when it will account for 17% of the group’s production, up from 11% now.
Militant attacks on pipelines and platforms are “part of doing business’’ in Nigeria for foreign oil companies and curbed as much as a third of Nigeria’s oil output in 2003 ahead of presidential elections, the report said. “As in 2003, it looks clear that the run-up to the 2007 election will see an exacerbation of the situation as local groups seek to eke out some political and financial capital from the central government,’’ Citigroup said.
Shell’s Nigerian venture, the Shell Petroleum Development Co has no estimate yet on when production will resume from the western Niger delta or the EA offshore field, both of which were closed by the attacks. EA exports remain cancelled for now and the security situation is preventing repair teams from reaching the damaged pipeline, Shell spokeswoman Sarah Smallhorn in London said yesterday.
The venture pumps about half of Nigeria’s output and is owned 55% by state-run Nigerian National Petroleum Corp, 30% by Shell, 10% by France’s Total SA and 5% by Italy’s Eni SpA.
Shell’s net production from Nigeria is on track to reach 650,000 barrels of oil equivalent a day by 2010, up from 414,000 barrels daily in 2004, Citigroup estimated. State-run oil companies including China’s CNOOC Ltd and Brazil’s Petroleo Brasileiro SA have entered Nigerian deepwater oil projects in competition with publicly-traded international oil companies.
“These opportunities could provide asset-swap currency should Shell wish to diversify its portfolio risk,’’ Citigroup said.
Shell chief executive officer Jeroen van der Veer has said the company has no plans to quit Nigeria. Amid violence last week, Shell announced an agreement with partners including Chevron Corp to develop the Olokola liquefied natural gas project in Nigeria.
“We worked for decades in Nigeria, and we have all the time new challenges, and we have overcome all the time the challenges,’’ Van der Veer said in a January 26 interview in Davos, Switzerland.
Militants will continue the violence until their demands are met, said Jomo Gbomo, a spokesman for the militant group, the Movement for the Emancipation of the Niger Delta, in an e-mailed statement last week. It had previously called on Shell to pay the Ijaw people $1.5bn as compensation for environmental damage and the loss of life caused by company operations.
The group has said it targeted Shell because government military helicopters used the company’s Osubi airstrip near the southeastern city of Warri to attack villages earlier this month in the Gbaramatu area of Delta state. The militant group has also released photographs of nine foreign oil workers they kidnapped on February 18 from a Willbros Group Inc boat near Royal Dutch Shell Plc’s Forcados export platform.
Nigeria produced 2.36mn bpd last month, making it the sixth-biggest producer in the Organisation of Petroleum Exporting Countries. – Bloomberg

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