Royal Dutch Shell Group .com Rotating Header Image

Chevron, Shell: Will Nigerian Crude Production Come to a Halt?

Screen Shot 2016-06-06 at 08.56.45

By Micheal KaufmanJun 4, 2016 at 10:50 am EST

The Nigerian government’s problems are only expected to worsen; the militant group, Niger Delta Avengers, has vowed again to bring the country’s crude oil production to “zero.” In the past few months, the group has attacked oil and gas facilities of foreign energy companies, including Chevron, Shell, and Eni, in a bid to force them to leave the southern region of the Niger Delta. The militants want international oil companies to end oil pollution in the country and give a higher share of crude sale revenue to the locals.

On Thursday, the group claimed responsibility for blowing up three oil and gas pipelines, as it warned the companies to completely halt crude oil production in the region. On its Twitter account, the Avengers said: “This is in line with our promise to all international Oil companies and Indigenous Oil Companies that Nigeria Oil production will be Zero.”

Government Reaction

President Muhammadu Buhari had planned to visit the Niger Delta on Thursday to meet the leaders of the area and address their concerns. However, the visit was canceled. The government is now enlisting the help of military to “control” the activities of the militant group. The Nigerian Air Force has deployed more “fighter aircraft, helicopter gunship and surveillance aircraft” in crude oil-producing areas that have been impacted by the attacks.

Although the Nigerian military forces are trying hard to restore safety in the region, the country’s western allies believe the government should also take other measures. The officials are now expanding the amnesty program to oil facilities. The program would give cash and other benefits, including job training, to the militants, who are expected to surrender their arms.

Will Shell, Chevron Leave Nigeria Soon?

The past two years have not been good for global oil and gas companies. Crude oil prices have plummeted from above $115 per barrel to below $50 per barrel during the period. Global oil prices even hit below $27 per barrel earlier this year. The low oil and gas prices have affected the energy companies’ revenues as well as liquidity drastically.

The Nigerian attacks come at a time when energy companies, including the likes of Royal Dutch Shell plc (ADR) (NYSE:RDS.A) and Chevron, are trying to cope in the low oil environment. The companies are cutting their capital expenditure (capex) and operating costs. The attacks by the Niger Delta Avengers are not only reducing the companies’ sales revenue but also worsening their cost structure.

In February, the militant group first appeared in the news after it attacked the Anglo-Dutch oil giant’s Forcados oil pipeline. The blast led the energy giant to declare Force Majeure on Forcados crude. The company called workers from abroad to complete the repair works.

In May, the Avengers attacked Shell’s facility again at Eja oilfield to pressurize the company to leave the Delta. The attack forced the company to evacuate its workers. This week, the group attacked the energy company’s Forcados pipeline again. The blast led to another crude oil spill in the region.

The attacks have impacted Chevron Corporation’s (NYSE:CVX) facilities in the southern Niger Delta the most. First, the group blew up the company’s Okan oil platform, which used to carry crude oil from several oil fields; and then when the energy giant started repair work on the platform, the group again attacked its oil and gas facility.

In May, the Niger Delta Avengers blew up the company’s main electricity feed pipeline at its Escravos tank farm. Last week only, it blew up the San Ramon, California-based company’s two oil wells, the RMP 23 and the RMP 24, in the Niger Delta.

Italian oil giant Eni was also not spared. This week the group attacked the company’s crude oil pipelines in Bayelsa: Clough Creek-Tebidaba pipeline and Ogboinbiri-Tebidaba pipeline. The militants have warned the company against carrying out any repair work in the region.

Currently, oil and gas multinationals are not in a position to suffer additional cost burdens. With the number of attacks escalating, the companies’ cost of cleaning the oil spill and carrying out repair work is also increasing. In light of the current situation, it seems that Shell, Chevron, and Eni SpA (ADR) (NYSE:E) may have no option but to wrap up their business in Nigeria soon. Other oil companies, including ConocoPhillips and Total, are also looking for options to divest their assets in the country.

Impact on the Nigerian Economy

Although Nigeria is the largest economy in Africa, the oil and gas pipelines in the country have not seen any maintenance work for more than two decades. The locals also suffer from lack of basic necessities.

The Avengers believe the government and foreign oil companies have colluded to completely ignore the locals, especially the minorities. The group demands that a large share of income from the crude oil sales be given to the residents of the region and invested in the country’s development projects. The Avengers have warned the government that if their demands are not fulfilled, they would continue to attack the oil companies’ facilities.

The attacks are not only impacting the foreign energy companies, they are also affecting the Nigerian economy. The companies have declared Force Majeure on three grades of Nigerian crude oil: Bonny Light, Brass River, and Forcados. Meanwhile, the country’s crude oil production has dropped to its 20-year lows and is set to decline further in the coming months.

Editing by Maria Shamim; Graphics by Danish Raza

SOURCE and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

Comments are closed.

%d bloggers like this: