Shell, Saipem Sign Nigeria Gas Pipeline Contract to Cut Flaring in Delta

Shell Petroleum Development Co. of Nigeria, Royal Dutch Shell Plc (RDSA)’s local unit, said it signed a $101 million contract with Saipem Contracting Nigeria Ltd. for a natural-gas pipeline.

The 42-kilometer (26-mile) link will collect about 30 million cubic feet a day of processed associated gas from the Otumara and Saghara fields in the western Niger Delta and send it through the Escravos-Lagos system to the domestic market, SPDC said today in an e-mailed statement. That will reduce flaring, or burning of gas produced alongside oil, it said.

“This is an extremely important project for SPDC in terms of our commitment to ending routine gas flaring, and consolidating our leadership position in the domestic gas market,” said Mutiu Sunmonu, SPDC’s managing director. “Security and funding permitting, we will continue to make good progress in bringing on the projects that will reduce flares and boost gas supply to the domestic market.”

The West African nation, with crude oil and condensate reserves of about 37 billion barrels and more than 187 trillion cubic feet of gas, loses $3 billion a year as a result of flaring of gas, according to the Petroleum Ministry. The country flared 15.2 billion cubic meters last year, according to the World Bank’s Global Gas Flaring Reduction Partnership.

The Hague-based Shell has invested about $3 billion in Nigeria to cut flaring of gas “significantly” from 2002 levels, the company said.

Nigeria is Africa’s biggest oil producer and the fifth- biggest source of U.S. crude imports. SPDC operates a joint venture in the nation in which Shell holds a 30 percent stake and state-owned Nigerian National Petroleum Corp. owns 55 percent. Total SA has a 10 percent stake and Eni SpA has 5 percent.

To contact the reporter on this story: Elisha Bala-Gbogbo in Abuja at ebalagbogbo@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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