Nigeria LNG Declares Force Majeure After Shell Pipeline Leak

Nigeria LNG Ltd., Africa’s largest liquefied natural gas export terminal, said it declared force majeure on exports following a Royal Dutch Shell Plc (RDSA) halt on deliveries after discovering a supply pipeline leak.

Force majeure, a legal step that protects a company from liability when it can’t fulfill a contract for reasons beyond its control, was declared on May 15. The declaration followed Shell’s shutdown of its Gbaran Ubie and Soku gas facility after the pipeline leak, Kudo Eresia-Eke, a Nigeria LNG spokesman based in Abuja, said today in an e-mail.

“Nigeria LNG is working with Shell Petroleum Development Co. and its other gas suppliers to seek mitigation measures,” he said. Gas supply to Nigeria LNG has been cut by as much as 50 percent by the Shell shutdown, he said.

Nigeria LNG operates the Bonny Island plant, which has six production units, or trains, able to produce 21.7 million metric tons of the chilled gas a year, or about 8 percent of the world’s total, according to data from the International Group of LNG Importers. The company supplied 12 percent of the world’s LNG for near-term delivery in 2011, according to the group.

The halt is “likely to have significant impact on liquefied natural gas prices,” Dolapo Oni, a Lagos-based oil-and-gas analyst at Ecobank Research, said today in an e-mail.

A Feb. 5 force majeure on gas deliveries to Nigeria LNG after a similar pipeline leak cut shipments and helped boost spot LNG prices in northeast Asia to a record on Feb. 4, according to data from World Gas Intelligence.

Nigeria LNG, which has long-term contracts with buyers in Spain, Italy, France and Turkey, exported 333 cargoes in 2012, the most since sales began in 1999, according to a report on its website. State-run Nigerian National Petroleum Corp. is the biggest shareholder, with a 49 percent stake. Units of Shell, Total SA and Eni SpA (ENI) hold 26 percent, 15 percent and 10 percent, respectively.

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

To contact the editor responsible for this story: Dulue Mbachu at dmbachu@bloomberg.net

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