Civil unrest is cutting into oil operations in Nigeria.
Shell Petroleum Development Co. of Nigeria Ltd. last week said production by its joint venture with Elf Nigeria Ltd., Nigerian Agip Oil Co. Ltd., and state owned Nigerian National Petroleum Corp. (NNPC) is running about 158,000 b/d below normal after civil disturbances caused shut-ins of several Nigerian oil fields.
Nigerians are protesting lack of progress in social programs.
Shell's joint venture, which it operates with a 30% interest, produced an average of almost 1 million b/d of oil in 1992. Nigeria's recent oil production has been 2 million b/d.
The lost production has forced Shell to warn lifters of crude oil there will be delays in loading tankers at Forcados terminal.
Uzere oil field in western Nigeria has been shut in since Apr. 14, said Shell, resulting in a loss of 11,000 b/d. Other production has been lost in nearby Escravos Beach, Afremo, Saghara, and Otumara fields.
People living near Escravos Beach terminal have been illegally preventing operational staff from leaving the field since Apr. 20, Shell said.
Eastern Nigerian fields also have been shut in for periods since early February. About 30,000 b/d has been lost through sporadic closure of Etelebou, Adibawa, Ubie, and Enwhe fields and some wells in Kolo Creek field.
Kolo Creek's Elebele community is said to be demanding a road and electrical power from the government's Oil Mineral Producing Areas Development Commission.
Another 28,000 b/d of oil production is said to have been lost in the Ogoni area, where some fields have been shut in since mid-1993.
Shell said the civil disturbances arose from demands for accelerated and expanded amenities programs. The company said it is making every effort to complete all its community projects, some of which were delayed by contractors.
"As a policy, Shell seeks to achieve cordial and peaceful relations with communities in its areas of operation," the company said.
"Shell has therefore been in continuous discussions with community representatives since the disruptions started in the hope that the issues will be resolved quickly and amicably and oil production restored."
A WARNING
Shell earlier warned Nigeria's government and NNPC that delayed payment of joint venture costs hinders production and revenues. Similar sentiments were expressed by other foreign companies operating in Nigeria (OGJ, Apr. 4, p. 80).
Brian Anderson, chairman and managing director of Shell Nigeria, told a Lagos conference the Shell joint venture lost 1,431 project days, $5.5 million in downtime costs, and deferred 13.5 million bbl of oil production in 1993 due to civil disturbances.
Anderson pointed out that Shell and its joint venture partners hold a significant responsibility for Nigeria's oil and gas production.
He said the joint venture has delivered increased investment in oil and gas development and exploration and increased Nigeria's production and revenue beyond what they would otherwise have been.
Anderson said, "The country is the sole beneficiary for any oil price increases between $12.50/bbl and $23/bbl, which may be the most likely sustained range in the medium term future.
"Delays in NNPC payments of its share of joint venture costs-cash calls-are beginning to severely limit activities due to lack of funds and the uncertainty it causes industry investors.
"Community disturbances in oil producing areas are increasing rapidly, significantly limiting production and revenue, and adding to international negative views of country risk."
Anderson warned that a way must be found to ensure full, regular, and timely NNPC cash call payments. He suggested payment by crude oil as the best method under the circumstances.
"Short term reductions in oil held investment and maintenance will have immediate and long lasting impacts on production and hence on government revenues," Anderson said.
"In the short term, Organization of Petroleum Exporting Countries solidarity on quotas probably will help sustain oil prices, which will help government fund NNPC's share of the joint ventures."
COMMUNITY SPENDING
Anderson said Shell's joint venture spent $20 million in 1993 in community assistance. This was a near doubling during 2 years.
The joint venture also spent $17.8 million last year on security staff. It uses 2,470 security staff, which works out to one for every two operations staff.
Anderson said it would be better to spend at least some of the security budget on the communities against whose incursions some of the security guards are deployed.
"Costs are escalating due to slow and inefficient bureaucracy, inflation, a fixed dollar/naira exchange rate, aging of oil facilities, and increases in taxation," Anderson said. "Infrastructure is insufficient and is poorly maintained."
