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Deteriorating situation in Nigeria worries oil majors
by Staff Writers
Lagos, Nigeria (UPI) Aug 13, 2013


disclaimer: image is for illustration purposes only

Royal Dutch Shell and Italy's ENI say they are concerned about Nigeria's deteriorating operating environment.

Nigeria, a member of the Organization of Petroleum Exporting Countries, is Africa's leading petro-state, currently exporting slightly more than 2 million barrels per day.

Both companies in their second quarter 2013 financial summaries note the situation in Nigeria is deteriorating daily and posing an increasingly serious risk for both foreign and domestic companies involved in Nigeria's oil and gas sectors.

Royal Dutch Shell recently declared the rising operational challenges in Nigeria, including theft of crude by organized gangs and pipeline vandal attacks had eroded its profit margin for the second quarter of 2013 by $250 million.

Royal Dutch Shell said Nigeria's deteriorating operating environment led to declining production of 100,000 barrels of oil per day in the second quarter 2013 and by 65,000 bpd compared to its second quarter 2012 production, noting in a statement that in the first half of 2013, "the operating environment in Nigeria deteriorated substantially."

Outgoing Royal Dutch Shell Chief Executive Officer Peter Voser said bluntly: "Higher costs, exploration charges, adverse currency exchange rate effects and challenges in Nigeria have hit our bottom line. These results were undermined by a number of factors -- but they were clearly disappointing for Shell.

"We are not targeting oil and gas production volumes. Rather we are focusing on financial performance. In the next 18 months we expect to see five major project start-ups, which should add over $4 billion to our 2015 cash flow."

Among Western oil giants, Shell is second by production, behind only ExxonMobil.

ENI in its interim update and second quarter results reported similar concerns. ENI reported for the first six months of the year it lost roughly 30,000 barrels of oil per day to criminal theft of maritime oil shipments, sabotage of oil facilities and flooding, leading to losses of approximately $554 million, the Vanguard newspaper reported Tuesday.

Seeking to downplay its concerns, however, ENI also said despite losses in its Nigerian and Libyan operations, the company expected its exploration and production output to grow by more than 3 percent for the rest of 2013.

While both companies have reiterated their intention to remain in Niger, Royal Dutch Shell is cautiously divesting itself of some assets there, a process it began three years ago.

Industry insiders, speaking on condition of anonymity, said Royal Dutch Shell will sell at least four more oil blocks in Nigeria in its latest divestment from Africa's top oil exporter.

Voser confirmed the gist of the information, saying, "We have recently launched strategic portfolio reviews in both Nigeria onshore and North America resources plays, which will lead to further focus and divestments there, as we continue to shape the company for the future."

The Royal Dutch Shell assets to be sold off are Oil Mining Licenses 13 and 16 onshore the Niger Delta, and offshore OML 71 and 72 blocs.

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