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UPDATE 2-Shell Nigeria 'may shut down oil pipeline' due to thefts

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(Globalpost/GlobalPost)

* Nembe Creek pipeline carries around 150,000 bpd

* Shell says oil thefts running at highest for three years

* Nigeria military accuses Shell of failing to plug leaks

By Joe Brock

ABUJA, March 4 (Reuters) - Shell may be forced to completely shut down its 150,000 barrel per day Nembe Creek oil pipeline in Nigeria due to an "unprecedented" amount of oil theft, the company's local unit said on Monday.

The Nembe trunkline is one of the most important production routes for Africa's top crude oil exporter, feeding the benchmark Bonny Light export terminal. The pipeline was replaced in 2010 at a cost of $1.1 billion, Shell says.

A spokesman for Nigerian security forces in the oil-producing Niger Delta said they were having successes against oil thieves. He denied that there was any surge in theft along the Nembe line, accusing Shell of failing to seal leaks.

Criminal gangs frequently tap into exposed pipelines in the winding creeks and waterways in the Niger Delta. Some of the crude is refined locally but the majority is transferred onto larger ships offshore and sold internationally.

Oil theft also has a devastating environmental impact, destroying fishing communities and poisoning water used for drinking and bathing in parts of the Niger Delta.

Flowstations on the pipeline were shut down three times between Feb. 22 and Feb. 25 due to thefts, with each incident deferring 150,000 bpd of production, Shell said in a statement.

"It is getting to the crunch that rather than allow people to continue to attack my pipeline and devastate the environment, I may actually consider shutting in the pipeline completely," Shell Nigeria managing director Mutiu Sunmonu said.

"...The situation in the last few weeks is unprecedented. The volume being stolen is the highest in the last three years; over 60,000 bpd from Shell alone," he said.

Even taking the theft into account, shutting the pipeline would be a drastic move that would cost Shell up to 150,000 bpd of production revenues.

Lieutenant Colonel Onyema Nwachukwu, a spokesman for Nigerian forces in the Niger Delta, said a crackdown on oil theft meant it was on the decrease, adding nearly 2,000 suspects had been arrested since it was launched last year and more than twice as many illegal refineries destroyed.

More than 100 oil barges had also been destroyed, he said.

"It's therefore quite difficult to reconcile the upsurge (in oil theft) spoken of by SPDC (Shell Petroleum Development Corporation) given these record achievements," he said.

"The JTF (joint task force) does not have the man power to put operatives permanently on over 6000km of pipeline."

He said SPDC - a Shell-run joint venture majority owned by Nigeria's state oil firm - had been alerted to numerous ruptures on pipelines but had failed to seal them, including on the Dasaba and Mekakiri creeks. Local communities also sometimes accuse Shell of failing to seal leaks.

"Till date, SPDC has done nothing to salvage the situation and yet it is issuing undue threats of shutting down ... The JTF does not have the expertise to clamp them, SPDC does," Nwachukwu said.

Nigerian Oil Minister Diezani Alison-Madueke said last month the thefts were the work of international crime syndicates and she had requested help from Britain to tackle the problem.

Security experts say they believe Nigerian officials must be complicit in the business, considering the scale of theft, which some oil companies have estimated at around 150,000 bpd across the whole of the industry.

http://www.globalpost.com/dispatch/news/thomson-reuters/130304/update-2-shell-nigeria-may-shut-down-oil-pipeline-due-thefts