FG, Shell, Others Lose $1bn to Closure of Forcados Export Terminal

The federal government and the International Oil Companies (IOCs), including Shell Petroleum Development Company (SPDC) and Chevron Nigeria Limited may have lost a total of $1billion to the closure of the Forcados Export Terminal, since March 4, 2014, THISDAY has learnt.

Shell at the weekend confirmed that the export terminal has remained closed for over seven weeks after it was shut down to enable the oil major to repair a sabotaged undersea pipeline.

Suspected Niger Delta militants had claimed the initial damage, and disclosed further on March 27 that its divers had inflicted further damage on the export pipeline, which was under repair.

Though the oil giant did not disclose how much crude oil is not being exported due to the closure, THISDAY gathered that over 200,000barrels per day was being shipped abroad through the 400,000barrels per day export terminal at the time it was closed on March 4.

Forcados, which is used by SPDC, Chevron and other IOCs to export crude oil from the Western Niger Delta, accounts for the shipment of one-fifth of Nigeria’s production of 2.2 million barrels per day.

At average price of $100 per barrel, the non-export of a conservative estimate of 200,000 barrels per day translates to a loss of $20million per day and over $1billion since the facility was shut down over seven weeks ago.

Nigeria’s export of crude oil suffered a major setback when SPDC declared force majeure on the export of Forcados grade of crude oil after it had shut down the facility last month.

The declaration of force majeure freed the oil giant from contractual obligations to its customers due to circumstances beyond its control.

The terminal was once shut down on October 19, 2012, due to flooding and damage to the supply pipelines.

However, the company resumed loadings at the terminal on November 21, 2012 and also lifted the force majeure declared on exports of Forcados grade of crude oil.

Before SPDC declared the current force majeure, the export terminal was shut down when a leak was discovered in one of the pipelines on March 4.

A Shell Nigeria spokesman, Mr. Precious Okolobo confirmed that SPDC Joint Venture declared force majeure on lifting of Forcados blend “effective 09:00hours (Nigerian time) Tuesday, March 25, 2014, due to ongoing repairs on the 48-inch crude export line at Forcados Terminal in the Western Niger Delta”.

“The subsea line was shut when a leak was discovered on March 4, 2014, leading to suspension of SPDC and third party crude oil exports through the terminal,” he added.

Okolobo said the company had been repairing the leak on the subsea crude export line, which was immediately shut down when it observed the leak.

“Helicopter overflights showed a slight sheen around the export line. A joint investigation conducted by representatives of communities, SPDC, regulators and security agencies determined that the leak was caused by third party interference. Unknown persons had installed a crude theft point on the line in water depth of about eight metres,” Okolobo said.

He said the company had mobilised equipment and materials to the site, and was working to repair and reopen the line as soon as possible.

Shell said it had suffered continuous vandalism of its pipeline networks with the Vice President, Nigeria and Gabon Shell Upstream International, Mr. Markus Droll recently listing the major challenges facing Nigeria’s oil and gas industry to include oil theft and security concern.

He said a growing and difficult problem was the issue of oil theft, adding that the company’s 2013 production was badly affected by the direct impact of thieves placing illegal oil tapping connections on oil facilities.

Droll said it was hard to put a figure on the cost of security, adding that both development and operating costs in Nigeria are higher than in other operating environments due to the issue of security.

By Ejiofor Alike