Shell Declares Force Majeure Over Nigeria Shutdown

Published at 10:58AM - 30/08/15

The Nigerian division of Royal Dutch Shell, have declared force majeure as its forced to shutdown two of Nigeria’s biggest oil pipelines.

The cause of the closure appears to be theft directly from the two pipelines, resulting in unknown damage to the pipeline and a major spill of Bonney Light crude oil.

The two pipelines, The Nembe Creek Trunkline and The Trans Niger Pipeline rank among Nigeria’s largest, with Trans Niger Pipeline capable of carrying 180,000 barrels of oil per day alone.

Both pipelines are run by Shell’s Nigerian arm, Shell Petroleum Development Company (SPDC).  They are yet to comment on the extent of the damage of the pipeline or the resulting leak, however in a statement they said, “SPDC is working to repair and reopen the two lines as quickly as possible.”

Oil Theft

Theft of oil directly from major transportation pipelines isn’t new in Nigeria.  Shell, like other oil companies operating in the West African state, face a continued threat of such events on a daily basis.

Estimates back in 2013 suggested that the cost of oil theft in Nigeria alone amounts to more than US$1.5 billon (GB£1 billion).

In previous interviews former Nigerian President, Goodluck Jonathan, said, “300,000-400,000 barrels of oil per day, or more than 10% of all Nigeria’s production, is being lost at a cost to the state and oil companies of around £1bn a month.

The amount is more than Nigeria spends on education and health combined, to a nation of 168 million.

Nigerian Corruption

The major problem facing oil companies in Nigeria is corruption.  Gone are the days when the theft was limited to small groups of locals stealing a couple of barrels. 

To shift literally hundreds of thousands of barrels of oil per day, more than the production of most offshore oil platforms, requires big operations and moreover inside help.

One such example was the devastating explosion in the Bodo area of Nigeria, back in 2013, the 25th attack on the pipeline in only two years.

The resulting explosion devastated much of area and caused hundreds of thousands of barrels of oil to spill.  The resulting investigation found an armed forces camp, built specifically to protect the pipeline, only 70 meters from both the explosion and a barge being bunkered with oil, capable of carrying 10,000 barrels.

That single even caused damage to a vast area, with size and scale still begging debated, and after the conclusion of court action in January of this year, resulted to payouts of US$85 million to the local Bodo community.

The results of theft in Nigeria are unsustainable to all sides, local communities and their land, as well as the oil companies themselves trying to operate safely.

With European courts now starting to hand down heavy fines for such leaks and resulting damage in foreign lands, and oil companies still unable to deal with the corruption led thefts, everyone waits to see if new President Muhammadu Buhari, voted in by Nigerians on a promise to deal with the nations corruption, is able to deal with the costly problem.