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Shell’s Nigerian Exports Face 5th Month of Disruption (Update1)

By Dulue Mbachu and Alexander Kwiatkowski

June 17 (Bloomberg) -- Royal Dutch Shell Plc told customers that Nigerian shipments will be disrupted for a fifth month in July as violence escalates in Africa’s largest oil producer.

Shell, Europe’s biggest oil company, suspended obligations on crude exports from the Forcados terminal in Nigeria to cover the remaining loading program for June and July, company spokesman Precious Okolobo said by phone today from Lagos.

A government offensive against armed groups since May has resulted in intense fighting in the western part of the oil- producing Niger delta region, where the Forcados terminal is located. Militant attacks have cut Nigeria’s oil exports by more than 20 percent since 2006. Nigerian crude is the light sweet variety of oil favored by U.S. gasoline refiners.

“There is definitely more of a risk in Nigeria than there was three months ago,” said Olivier Jakob, managing director of Zug, Switzerland-based consultancy Petromatrix GmbH. “Oil installations are still being attacked.”

Force majeure remains in place on exports of Shell’s Bonny Light and EA crude in June and also on supplies of gas to the NLNG project, The Hague-based Shell spokesman Wendel Broere said in a phone interview. The measure has been extended into July for Forcados supplies, he said. EA production has been disrupted since February 2006.

Force majeure is a legal clause that allows companies to miss export obligations due to circumstances beyond their control. The extension took effect from 6 p.m. yesterday due to damage to the main pipeline supplying crude oil to the Forcados terminal, Okolobo said.

Investigating the Damage

“An investigation into the damage is ongoing, and we’re also taking steps to repair the line and resume production,” he said.

Shell originally declared force majeure on Forcados exports at the beginning of March following an attack on the Trans- Escravos pipeline.

Forcados oil exports were scheduled to be about 200,000 barrels a day prior to the attacks in March, according to shipment plans. Shell’s Nigerian oil and gas production averaged the equivalent of 360,000 barrels a day in 2008.

The main militant group in region is The Movement for the Emancipation of the Niger Delta, or MEND. It claims to be fighting to channel more oil revenue to the region’s poor. Some armed groups hijack vessels and kidnap oil workers for ransom.

Chevron Corp.’s Nigerian production has been cut by about 100,000 barrels a day after an attack on a trunk line at the end of May. Rebels have since claimed they destroyed a Chevron oil- pumping station in the Niger Delta.

Chevron’s daily production in Nigeria last year averaged 376,000 barrels of crude oil, according to the company.

To contact the reporters on this story: Dulue Mbachu in Lagos at dmbachu@bloomberg.netAlexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net

Last Updated: June 17, 2009 09:01 EDT

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