ExxonMobil Declares Force Majeure on Strike, Shut-In 800,000 bbl/d

LONDON, April 28, 2008 (Dow Jones Newswires)

ExxonMobil Corp. (XOM) Monday took the drastic step of declaring force majeure on its energy operations in Nigeria because of an ongoing labor strike, signaling the damaging affect the dispute is having on its operations in the country.

The declaration means ExxonMobil is unable to meet its contractual obligations because of a shut-in by the strike of around 800,000 barrels a day of crude oil output.

"The (Exxon) affiliates will not speculate about the length of the shut-in nor how long it will take to restart production," an Exxon spokeswoman said.

ExxonMobil also said it was still hoping for a resolution to the strike.

"We have notified all relevant agencies including the Nigerian National Petroleum Corp. and the Department of Petroleum Resources and are working with them to ensure quick resolution of the issues," the company said in a statement sent to Dow Jones Newswires.

The state-run NNPC management is mediating in the strike, which the workers began Thursday over their demands for higher wages at ExxonMobil's Nigerian unit, Mobil Producing Nigeria Unlimited. Talks are being held Monday in the capital, Abuja.

Even if the strike ends soon it will be many days before pipelines, drilling rigs and export facilities can be brought back into full service. The labor walk-out started late last week and has helped send crude prices sharply higher.

Crude-oil futures are trading 12 cents higher at $118.64 a barrel on the New York Mercantile Exchange. Earlier in the day, futures set a fresh intraday record high of $119.93, partly on this latest disruption to Nigeria supplies.

This strike is yet another setback for Nigeria's ability to supply crude reliably. Months of civil unrest and repeated attacks on oil production and transportation facilities have already curtailed production in Africa's largest producer.

Nigeria's main militant group Monday said an attack it made on a Royal Dutch Shell PLC (RDSB.LN) oil facility last Thursday knocked out 350,000 barrels a day of production.

If true, it would mean that about three-quarters of Nigeria's effective pumping capacity of 2.5 million barrels a day is off line, according to Dow Jones Newswires estimates.

The production problems come at an inopportune time for U.S. refiners, who seek high-quality crude oil from Nigeria as they boost gasoline output ahead of the summer driving season. Skyrocketing crude prices have lifted average U.S. retail gasoline prices to all-time record highs.

On Monday, the national average was $3.603 a gallon, 22% higher than a year ago, according to the AAA Daily Fuel Gauge Report.

LONDON, April 28, 2008 (Dow Jones Newswires)


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