Shell Shuts Down Nigerian Pipeline Citing Rampant Theft

By Jonathan Davis | May 04 2012 3:03 PM

Royal Dutch Shell announced Friday it has shut down a major crude oil pipeline in Nigeria, citing extensive damage due to theft. The closure will defer some 60,000 barrels of crude oil production per day while repairs are made, Shell said.

Reuters

An aerial view during a media tour by oil company Shell shows locally built barges surrounded by the runoff from crude oil at an illegal oil refining site along the Imo river near Nigeria's oil hub city of Port Harcourt

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The Anglo-Dutch oil and gas giant warned that continued theft may make it unable to fulfill its contractual obligations on the production of Bonny Light crude, a high-grade type of crude oil specific to Nigeria.

The Shell Petroleum Development Company of Nigeria Ltd. (SPDC) declared force majeure on outstanding cargoes of Bonny Light with effect from noon today, 4th May 2012, a statement issued by Shell read.

The action is due to production deferment caused by incessant crude theft and illegal bunkering on Nembe Creek Trunkline (NCTL) ... SPDC is working hard to repair the line and resume production as quickly as possible, Reuters quoted the company as saying.

The NCTL runs above ground through under-policed areas in the Niger Delta, making it an easy target for criminals who tap the pipelines and send it to their own refineries or to tankers along the nearby coastline.

The oil theft and illegal refining is at a large scale, with tank farms, barge building operations and barges shuttling crude to waiting tankers offshore, Shell chief executive Peter Voser said last month.

The Nigerian government has profited to the tune of billions of dollars from oil production in the Niger Delta; however communities there claim they have not seen the benefits of their nation's immense oil wealth.

Although militancy in the region has been on the decline after the government gave amnesty to those who gave up arms in 2009, highly organized criminal networks devoted to oil theft remain.

Shell estimates some 150,000 barrels of oil are stolen from their facilities across Nigeria every day.

More than 75 percent of all oil spill incidents and more than 70 percent of all oil spilled from SPDC facilities in the Niger Delta between 2006 and 2010 were caused by sabotage, theft and illegal refining, Shell said in a separate statement issued earlier this year.

Moreover, the company says 19 SPDC employees and contractors were kidnapped by criminal gangs in 2011, and one fatality was reported in 2010.

It is unclear when repairs to the NCTL will be completed.