Worldwide offshore rig utilization moved up slightly this week, as 2 idle rigs went on contract. The 262' MS Blake 303, formerly the Pride Kentucy, has finished its return from retirement and modifications to start work for Ridgelake in GOM. And the 125' ILC Dolphin 109 returned to active duty after nearly a year of being stacked in Port Fourchon.
Unrest in Nigeria
Nigeria is the largest oil producer in Africa and the eleventh largest in the world, producing about 2.4 million barrels per day over recent months. The economy of Nigeria is extremely dependent on oil production, deriving about 80% of government revenues from the oil sector. With net oil exports of about 2.1 to 2.2 million bpd, the export of crude oil delivered about $27 billion into Nigerian coffers during 2004. However, the people of Nigeria have experienced little benefit from this flow of oil revenue, with more than 70% of the nation living below the poverty level. This lack of improvement in living conditions is a factor in the ongoing violence in the Niger Delta region, where most of the oil and gas activity within Nigeria occurs.
Since the removal of the former military dictatorship and the election of the Obasanjo government in 1999, security has been a major problem for the oil industry in Nigeria. For instance, during the first nine months of 2004, the Nigerian government estimated that there were nearly 600 cases of oil pipeline vandalism. And over the last 3 years, there have been at least 45 oil industry workers held hostage by militants in the Niger Delta.
Most of the violence that has been promulgated in southern Nigeria has been carried out under the banner of emancipation and control of petroleum resources for the 14 million Ijaw people of that region. Most recently, the Movement for the Emancipation of the Niger Delta (MEND) has demanded the release of the jailed Ijaw militant leader Mujahid Dokubo-Asari. Although these groups (or at least some of their members) may honestly view this as a justifiable struggle seeking to improve their lives and the welfare of their community, little doubt remains that the violence is actually being carried out under the leadership of criminal leaders who view the stealing of crude oil and ransoming of hostages as opportunities to increase their wealth and buy more weapons.
At this point, there are nine foreign oil workers being held hostage in the swamps of the Niger Delta, and Nigeria's overall oil exports have fallen about 450,000 bpd, roughly 20%. The situation is bad, and only looks to get worse as militants continue to threaten new violence.
Effects on Operators
Beyond Shell, no other operators have experienced reported lossed in production, although many Western oil companies are operating in the region including Total, Chevron, and ExxonMobil. ExxonMobil has the second-largest production presence in Nigeria, producing over 570,000 bpd, and planning to increase that total to 1.2 million bpd in the next five years. A large portion of that increase is expected to come online this year with the startup of the Erha field, which is expected to produce 150,000 bpd via an FPSO.
Effects on the Offshore Rig Fleet
There are currently 12 jackups, 7 semisubs, 5 inland barges, and 1 drillship working in Nigerian waters. Of these 25 rigs, the most likely to be accessible to militant activity would be the inland barges, four of which are working for Shell while one is under contract to Agip.
The drilling contractor with the most Nigerian exposure is Noble, which currently has 7 rigs (6 jackups and 1 semi) under contract in Nigeria. Transocean is a close second with 5 rigs (3 semis, 1 jackup, and 1 drillship) working offshore Nigeria. And GSF comes in third with 3 jackups working in the region.
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