Theft Claims Fuel Further Downside Risk
BMI View: Shell's threat to shut down the Nembe Creek pipeline following a surge in oil thefts is likely to fuel growing concerns about security in Nigeria. We maintain our long-held view that Nigeria must act decisively to improve its business environment, which appears to be worsening. Prompt political intervention will be needed in 2013 to alleviate downside risk to the country's hydrocarbons sector.
Royal Dutch Shell , one of Nigeria's largest producer s and exporter s has threatened t o shut down the 150,000 b arrels per day (b /d ) N embe Creek pipeline. The line transports crude oil from producing field s to Shell's Bonny export terminal at Port Harcourt. Mutiu Sunmonu , managing director of Shell Petroleum Development Company of Nigeria (SPDC) , a j oint v enture between Shell (30%), Nigerian National Petroleum Corporation (55%), Total (10%) and Eni (5%), made the threat on the basis that oil theft ha s been accelerating, with the company estimating record losses of 60,000 barrels per day ( b/d ) .
However, Nigeria's security forces appear to disagree with Shell's take on the situation. A spokesman is reported to have denied that there has been a surge in thefts along the pipeline, alleging instead that Shell has simply failed to seal leaks. If theft is the cause, Shell will be able to declare force majeure - a clause that allows producers to miss contractual delivery quotas due to uncontrollable circumstances.
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