Shell Confirms Bonny Oil Flowing at Nigeria Pipeline

LONDON Aug 11, 2006 (Dow Jones Commodities News)

Oil has started flowing again through a Nigerian pipeline that carries Bonny Light crude produced in a joint venture by Royal Dutch Shell PLC (RDSA), Nigerian oil sources said Thursday.

Shell declared force majeure on 180,000 barrels a day of oil output late July following an unexplained leak at the pipeline. However, a spokesman for Shell Petroleum Development Company of Nigeria said Friday the force majeure declared last month is still in place.

A spokeswoman for Shell in London also confirmed the pipeline was back in use Thursday.

"A temporary measure is in place and this means that oil has started flowing again," a source with state-run Nigerian National Petroleum Corp., told Dow Jones Newswires.

An NNPC marketing source also said he'd been told by Shell that it would be able to meet commitments to buyers for late August and all of September.

NNPC holds a 55% stake in the venture.

Shell's spokesperson said that eight out of the nine flow stations which had been closed due to the pipeline leak were operational and being ramped up Thursday.

She said when fully operational, the pipeline's output would reach 173,000 b/d.

The spokesperson also said work is being carried out at the ninth flow station, which would be opened at a later date. When operation the ninth flow station would boost production by an extra 7,000 b/d.

The spokesperson said there is however, no update regarding Shell's force majeure.

News that Nigerian crude oil is returning to the market should ease traders' concerns.

Ethnic disruptions in recent months have affected as much as 800,000 b/d, or a third of Nigeria's crude output.

U.S. oil prices also rallied to near record levels of $78.40/bbl Monday, after BP PLC (BP) Sunday said it began a shutdown of its Prudhoe Bay operations in Alaska.

The Department of Energy also said Wednesday that petroleum inventories were drawn down more than analysts expected.

            -Table Of Lost Nigerian Oil Output- 
                  (Output in barrels a day) 
Bonny Light 
Pipeline          SPDC -a     180,000          N/A 
Bonny Light 
Pipeline          CNL -c       25,000          N/A 
Forcados Terminal 
EA Platform       SPDC        477,000       2H 2006 -b 
Channel           SPDC         18,000          N/A 
Olero Creek       CNL          85,000       2006-2007 
Marakaba          CNL          13,000          N/A 

Total output currently believed lost is 798,000 B/D, or just over 30% of Nigeria's output of 2.5 million b/d.

a. SPCD is the Shell Petroleum Development Co., a joint venture operated by Shell, which owns 30%, and with the Nigerian National Petroleum Co. with 55%, Total SA with 10% and Eni SpA unit Agip SpA with 5%.

b. Shell CEO Jeroen van der Veer said on July 27 that staff may return to facilities in the second half of this year.

c. Chevron Nigeria Ltd., which is a joint venture operated by Chevron, which owns 40%, and the Nigerian National Petroleum Co. has the remaining 60%.

Copyright (c) 2006 Dow Jones & Company, Inc.


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