UPDATE 3-Shell can't say when will lift Nigeria force majeure

Tue Oct 23, 2012 11:04am EDT

Related Topics

* Shell declares force majeure on Bonny, Forcados grades

* Suspected oil theft main cause of problems

* Total stops production at onshore block due to flooding

By Tim Cocks

LAGOS, Oct 23 (Reuters) - Royal Dutch Shell cannot yet say when a force majeure on two grades of Nigerian crude oil will be lifted, after production stoppages caused by theft and flooding cut up to 20 percent of exports from Africa's top supplier.

On Monday, Shell said its Nigerian venture had declared force majeure on exports of the Bonny and Forcados crudes on Friday, citing damage caused by thieves and flooding affecting a third-party supplier it did not identify.

"Shell cannot yet say at this time when the force majeure will be lifted," Shell spokesman Precious Okolobo said by telephone on Tuesday, declining to give further details. Shell is Nigeria's biggest oil operator.

Nigeria's oil is exported to the United States, Asia and Europe and supply disruptions can affect world prices because it is priced against the Brent oil benchmark. Brent fell by $1.70 a barrel to below $108 on Tuesday, a smaller decline than the U.S. crude benchmark.

Separately, French oil company Total on Tuesday told Reuters it had stopped oil and gas production from its onshore OML 58 block due to flooding. The block, in which Total has a 40 percent stake, normally produces the equivalent of 90,000 barrels per day (bpd) of oil.

Total confirmed that output produced in OML 58 is exported via Shell's Bonny terminal, in which the French group owns 10 percent.

Bonny Light and Forcados are two of Nigeria's most important oil grades and in October accounted for 427,000 bpd, about a fifth of the country's total exports of 2.048 million bpd.

A force majeure allows a company to suspend contractual obligations in the face of unexpected events. Oil trading sources said exports of Bonny and Forcados were continuing, but exports were delayed by around five days.

The outages underscore the scale of the problem of oil theft, or "bunkering," as it is known in Nigeria, to which officials say up to 20 percent of its oil is lost.

They would also be the first confirmed evidence of an impact on oil output by the worst flooding Nigeria has experienced in five decades. The Niger river burst its banks last month, submerging stretches of the oil-rich region in flood waters.

FIVE-DAY DELAYS

Traders said Shell's Forcados exports had been delayed by about five days, while there had so far been little additional impact on Bonny loadings because production of that grade has already been reduced for some weeks.

The force majeure on Bonny is linked to "attacks a few weeks ago. It's five days' delays and stuff we already know about," said a trader of the crude.

On Sept. 30, Shell said its Nigerian unit closed the Bonny pipeline which sends crude to the Bonny terminal and stopped 150,000 bpd of production after oil thieves caused a fire.

A spokesman for ExxonMobil said its Nigeria Quo Iboe and other operations had not been affected by flood waters. Chevron which operates the Escravos field did not comment.

On Monday, Shell said loadings of Forcados were affected by damage caused by thieves tapping into the Trans Forcados Pipeline and the Brass Creek trunk-line, while the Bonny loadings were hit by a fire on a ship suspected of stealing oil and flooding affecting a third party producer.

A senior politician from Nigeria's Niger Delta, Dele Cole, launched a campaign against bunkering on Monday, highlighting the international criminal networks involved in the trade, including Balkan criminal groups.

Bunkering causes huge environmental damage in Nigeria, as burst pipelines are often left spraying oil into the Niger Delta's fragile wetlands environment.

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