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Shell to reduce production after sabotage in Nigeria

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Latest update : 2008-07-28

Oil giant Shell will reduce production running through a pipeline in southern Nigeria that was damaged in a double sabotage attack Monday. In consequence, oil prices have risen above 123 dollars a barrel.

Militants in Nigeria's Niger Delta said on Monday they had blown up two major oil pipelines belonging to Royal Dutch Shell, forcing the firm to halt some production and helping push world oil prices higher.

The Movement for the Emancipation of the Niger Delta (MEND), whose campaign of violence has cut Nigeria's oil output by around a fifth since early 2006, said its members conducted the attacks early on Monday.

"Detonation engineers backed by heavily armed fighters ... sabotaged two major pipelines in Rivers state of Nigeria," it said in an e-mailed statement.

The group said the two pipelines were attacked at Kula -- through which the Nembe Creek trunkline passes -- and at Rumuekpe, located around 50 km (30 miles) west of the main oil city of Port Harcourt.

Shell, which operates onshore in Nigeria in a joint venture with state oil firm NNPC, said it had halted some output from the Nembe Creek trunkline but gave no details on the volume.

Asked about the second location at Rumuekpe, a Shell spokeswoman in Nigeria said the company was continuing to check its facilities for any possible damage.

Oil Minister Odein Ajumogobia told Reuters Shell was still assessing the damage and any supposed figures for the amount of production shut down would be "speculative".

Industry sources said about 130,000 barrels per day of crude oil flows through the Nembe Creek pipeline, while some 100,000 bpd passes through Rumuekpe.

Both pipelines are connected to the Bonny export terminal in Nigeria, the world's eighth largest exporter.

Oil from the facility is popular in the United States and Europe because it is easily refined into gasoline, diesel and other crude products.

U.S. crude oil prices found support from the news, trading above $123 a barrel on Monday.

 

WARNING

The Shell-operated pipeline has been a target of previous militant attacks, most recently in May, due to its vulnerable location in the deep forests of the delta -- the heart of Nigerian production.

Last week, MEND said it would target oil pipelines to prove it did not receive payments from the government to end its attacks on the oil sector. The head of NNPC was quoted in Nigerian newspapers last week as saying the company had paid militant groups $12 million to protect facilities in the delta.

NNPC later said it was quoted out of context and the money was given to the local community, not militants.

Successive administrations in Nigeria have effectively bought off leaders of militant groups in the Niger Delta by offering financial rewards for laying down their weapons, a strategy known locally as "settling the boys".

MEND says it is fighting for greater control of the natural resources in the delta, an impoverished area polluted by half a century of oil exploration.

President Umaru Yar'Adua has pledged to try to address the root causes of the unrest by bringing development to local communities but has also said he will not tolerate the presence of armed groups in the creeks.

Plans for a long-delayed peace summit promised by his administration have fallen into disarray after a key government-appointed mediator resigned this month and MEND said it would not take part.

Date created : 2008-07-28

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