OWING to a routine shut-in, 225,000 barrels of crude oil output per day Nigeria output would go offline for a 10 days period in March when Shell Nigeria Exploration and Production Company (SNEPCO) commences maintenance on the Bonga offshore oilfield.
Although Bonga oil offshore oil field accounts for 225,000 barrels per day on average, Reuters reported that the scheduled loading programme for March shows only three 950,000 barrel cargoes, where the previous month had eight.
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HE Abdullah bin Hamad al Attiyah, the Deputy Premier and Minister of Energy of the Kingdom of Qatar (r) presents a gift item to his guest, Odein Ajumogobia (SAN), Minister of State for Energy (Petroleum) during an official visit to Qatar Petroleum in Doha, recently.
The first scheduled cargo load is set around March 21. “This is because of maintenance,” one trader explained.
Already, Nigeria’s total oil output is impaired by the activities of militants which have left an average 850,000 barrels per day shut-in over the last three years with the exploration and production companies averaging 2.1million barrels output per day.
Following the resultant loses from its shut-in output, Shell Nigeria companies have fused into one company under a new scheme tagged 'One Shell', resulting in job cuts and rationalisation across board.
Although the company refuses to admit it, the resultant shut in output owing to increased militancy in its areas of operation has impacted ability to sustain its robust local structure or even meet the aspirations of shareholders.
Amongst the exploration and production companies operating in the country, Shell subsidiary, Shell Petroleum Development Company (SPDC), operator of the largest joint venture appears to be the worst impacted accounting for an average 500,000 barrels shut in per day.
While speaking on the development in Davos, Switzerland where he is attending the World Economic Forum, Jeroan Van der Veer, Shell CEO said ‘We are prepared for whatever we face’.
The Shell CEO is expected to face Nigerian President Umaru Yar’Adua to discuss what can be done to restart production in the country within the shortest possible time.
“Conditions must improve for us to restart production,” said Van de Veer, “and we’re not there yet.”
At the meeting with Yar’Adua, “we have lots to talk about. It’s not only about security, it’s also about funding. The lack of funding for some projects has caused issues with meeting targets. ... It’s prevented us from ending all gas flaring,” he said.
Gas flaring means the burning off of natural gas found along with oil.
Yar’Adua confirmed the two men would meet and said he would seek more investment from Shell into Nigeria’s downstream energy sector.
He also broached the idea that international companies could enter joint ventures with the national oil company to build power plants in the West African nation.
Over the past several years, Shell has faced hijackings, hostage situations, and holdups in the leading oil exporter of Africa.
On its part, the Associated Press reported that attacks carried out by the Movement for the Emancipation of the Niger Delta (MEND) and other armed groups over the past two years have cut Nigeria’s oil exports of 2.5 million bbl/d by more than 20%, adding pressure to global oil prices.
Just last month, Shell announced it would cut costs and jobs in Nigeria because of pressure from the government to change the terms of its contracts and also because of attacks from local insurgents.
Still, Shell remains steady in its forward progress in the region and elsewhere, considering the fluctuation of oil process as a common market factor to be considered while planning operations.
“We don’t speculate on oil prices of the future,” said Van de Veer. “We simply take it as it is, and then we make sure in that business environment we do the best possible job.”
Van de Veer said Shell prepares itself for the unexpected consequences of the market by envisioning three types of scenarios when planning for the future: high oil prices, low oil prices, and the yo-yo.
The question one should ask is who is holding the yo-yo, and who is the yo-yo. Maybe Friday’s meeting between Van de Veer and Nigeria’s president will provide the oil and gas industry with a very important answer
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