Shell Nigeria declares force majeure on Bonny Light crude exports

Indication emerged weekend that about 10 million barrels of Nigeria crude oil cargoes for September-loading are still looking for buyers, and face steep competition from other crude oil grades. This is coming on the heels of Shell shutting in about 162, 000 per day as it declares force majeure om Bonny light crude. This would mean delay in realizing revenue from crude export into the federation account.
The development may mean more hard time for state government as their ability to pay salaries are further jeopardize by low level inflow into the federation account.
There are mounting doubt about the ability of the government to achieve even 20 per cent of capital project this year. Shell’s Nigerian unit, Shell Petroleum Development Company (SPDC), declared force majeure on Bonny Light crude oil exports after shutting down two key pipelines in the country due to a leak and theft. The Trans Niger Pipeline and the Nembe Creek Trunkline are two of the biggest onshore pipelines in Nigeria, and carry Bonny Light crude oil to vessels for export worldwide.
Planned exports of 162,000 barrels per day (bpd) of Bonny Light in September accounted for just over 8 per cent of Nigeria’s total planned exports of nearly 2 million bpd.
A leak was reported on the Trans Niger Pipeline at Oloma in Rivers State, which has the capacity to carry around 180,000 barrels a day of crude oil. SPDC closed the Nembe Creek Trunkline to remove crude theft points, it said in a statement.
Shell, whose SPDC subsidiary operates the pipeline with Nigeria’s state oil company NNPC, did not give a timeline for restarting either line, and did not elaborate on the scale of the leak. Traders said the force majeure was unlikely to last long, depending on the size of the leak. Theft is rampant in Nigeria’s oil industry, and Shell has been forced several times over the past year to close its pipelines to remove theft points or clean up oil spills.
The pipeline closures do not always lead to a force majeure declaration, and even when they do, it does not preclude some export cargoes from loading. Shell has also come under increasing pressure to pay damages for oil spills. Earlier this year, it agreed to pay 55 million pounds ($85m) to the Bodo community for a spill in the Niger Delta.
The issue could create a problem for Shell on the physical oil market, as traders said it was still holding the bulk of the export cargoes, but it could also alleviate the general oversupply of crude oil in the Atlantic Basin.