UPDATE 2-Thieves force Nigeria LNG to declare force majeure

Thu Nov 27, 2008 12:26pm EST
 
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(Adds NLNG warning on obligations)

By Nick Tattersall

LAGOS, Nov 27 (Reuters) - Thieves tapping into energy pipelines in southern Nigeria have forced Nigeria LNG Limited, supplier of 10 percent of the world's liquefied natural gas, to warn it may not be able to meet all of its export obligations.

NLNG said on Thursday it had warned buyers of possible disruption after Royal Dutch Shell (RDSa.L) was forced to shut down its Soku gas plant, which contributes 40 percent of NLNG's feed stock, to repair pipeline damage caused by thieves.

Shell declared force majeure on its gas supplies to the NLNG plant in Rivers state in the Niger Delta earlier on Thursday following a sharp rise in illegal connections on pipelines to Soku in recent months.

"The level of theft from this pipeline has meant we had to remove more than 50 illegal valves in August and September alone," Mutiu Sunmonu, managing director of Shell's SPDC subsidiary in Nigeria, said in a statement.

"Over the last few weeks the situation has deteriorated rapidly and resulted in a situation where safety concerns dictated we had to shut in. We also approached a stage where we have questions regarding the integrity of the pipeline which we will check," Sunmonu said.

SPDC said the force majeure would last for the duration of the shut down.

It said repair work had to be carried out on pipelines outside the perimeter of the Soku plant itself but that the facility had to be shut down for safety reasons. It did not specify how long it would take for repairs to be completed.

LNG is gas cooled to liquid form and shipped in special tankers to markets in the developed world where it can be used for power generation or making chemicals. International demand has been fuelled in recent years by volatile oil prices.

NLNG, which exports 22 million tonnes per year of compressed gas, said it had warned buyers that it was bound to lose some cargoes as a result of Shell's shut-in.

It said it was trying to optimise feedgas from other suppliers but would not be able to make up all of the shortfall.

NLNG, whose export plant is located on Bonny Island, an industry hub in the restive Niger Delta, is controlled by a group of Western companies including Shell, Total (TOTF.PA) and Eni unit Agip (ENI.MI). State-run NNPC owns 49 percent.

Militants have blown up crude oil pipelines and kidnapped foreign workers in the delta in recent years to push demands for a fairer share of the region's natural wealth, but the gas industry has largely been unscathed by the unrest.

Armed gangs have taken advantage of the insecurity to tap into pipelines and engage in a lucrative trade in stolen crude worth millions of dollars a day.

(For full Reuters Africa coverage and to have your say on the top issues, visit: africa.reuters.com/ ) (Editing by Randy Fabi)