Nigerian Oil Output Plunges to 20-Year Low as Attacks Escalate

(Bloomberg) - Nigeria is suffering a worsening bout of oil disruption that has pushed production to the lowest in 20 years, as attacks against facilities in the energy-rich but impoverished nation increase in number and audacity.

Chevron Corp. said on Friday it had shut down about 90,000 barrels a day of output following an attack on an offshore platform that serves as a gathering point for production from several fields. Even before that strike on Wednesday night, Nigerian oil production had fallen below 1.7 million barrels a day for the first time since 1994, according to data compiled by Bloomberg.

“This is some very, very sophisticated brazen attack,” said Dolapo Oni, the Lagos-based head of energy research at Ecobank Transnational Inc. “It is a resurgence of militancy. These guys don’t seem to be after money. They just want to frustrate the government.”

The fresh round of attacks come after President Muhammadu Buhari vowed to stamp out corruption and oil theft. They echo a campaign waged by the self-proclaimed Movement for the Emancipation of the Niger Delta between 2006 and 2009, which cost the Nigerian government billions of dollars of lost oil revenue. That violence abated after thousands of fighters accepted an amnesty from late-President Umaru Musa Yar’Adua and disarmed, in exchange for monthly payments from the government in some cases.

Facility Breached

Chevron said it shut down its Okan offshore facility after it was “breached by unknown persons” and had sent “resources to respond to a resulting spill.” The facility, which feeds crude and gas into Escravos, one of the country’s largest export facilities, is jointly owned by the U.S. company and state-owned Nigeria National Petroleum Corp.

A group calling itself the Niger Delta Avengers said on its website that it was responsible for the attack. The authenticity of the claim could not be verified by Bloomberg News.

The Nigerian government is struggling to contain the economic damage of the slump in energy prices and separate attacks in the north of the country by the Boko Haram Islamist insurgency. The country’s foreign reserves have fallen to less than $27 billion, the lowest since 2005. The International Monetary Fund expects the economy to expand 2.3 percent this year, the weakest growth since 1999.

"Lower oil prices have meant that the poorer oil-producing countries don’t have enough money to pay for social services,” said Ehsan Ul-Haq, senior oil analyst at KBC Process Technology Ltd. “Protests are increasing as a result."

Force Majeure

In February, Royal Dutch Shell Plc declared force majeure -- a legal clause that allows it to stop shipments without breaching contracts -- after an attack on a pipeline feeding the Forcados terminal, which typically exports about 200,000 barrels a day.

The International Energy Agency estimated last month that Nigeria could lose an estimated $1 billion in revenue by May, when it expects repairs on Forcados to be completed. The terminal may not restart until June, Nigerian Oil Minister Emmanuel Kachikwu said April 20.

Major oil companies like Shell, Chevron, Total SA, Eni SpA and ConocoPhillips, which for five decades dominated the Nigerian oil industry, have been selling onshore and shallow water oil fields in the Niger delta to local companies, concentrating their investments in deep-water fields outside the reach of militants.

"If prices remain low, we will see more and more problems including these kind of sabotage attacks," said Ul-Haq.

- With assistance from Rupert Rowling. To contact the reporters on this story: Javier Blas in London at jblas3@bloomberg.net ;Yinka Ibukun in Lagos at yibukun@bloomberg.net To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net Sarah McGregor

Copyright 2016 Bloomberg News.

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Eric K. | May. 12, 2016
Oh Nigeria!! You either love or hate it - there is no in-between... Been here for 9 years and never had a problem, but it's always lurking just under the surface.. I agree with Scott - I have many Nigerian friends, and you are much better off relying on their intel vs. the military / security complex. Good People - Bad Government.. Sound Familiar?

Mark Van Sickle | May. 10, 2016
I don't understand why O&G companies even bother investing in Nigeria. Instability in Nigeria has existed for decades and appears to only be getting worse. I thought Shell pulled-out all together last year. How can any investor justify being there, when forecasting revenues and production is a moving target? Extremely violent and dangerous place for any O&G company, particularly US companies to subject its employees to.

Scott Southerland | May. 7, 2016
I worked in Nigeria for a year for (a North American oil and gas company) in systems completions for a project, and there is almost complete chaos in the Delta States area from Port Harcourt and anything south from there. Trying to get from ... Intels armored compound to the helideck to fly offshore was always a fun experience: Mopol, or military police, with a lead truck complete with RPGs and guys with AK47 assault weapons, you riding in a blacked out SUV and a chase truck complete with the armed soldiers riding for about 45 minutes through the streets and back roads with the police whipping anyone who got in the way with horse flogs. They would also do this when drivers of vehicles did not get out of the way ... I wonder why the good people there hate the oil companies? I found the Nigerian people to be very kind, non-racist and loving. I had many friends there, which is the way to roll if you ask me. They would all tell me, 'Don't worry Scott, you are one of us. We will not let them kidnap you,' and that was the way it went. Me - I never had any problems.


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