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Shell says appetite for Nigeria oil falls after pipeline attacks

Thursday, 23 February 2012 | 00:00
Attacks on oil pipelines, a dearth of funding from the state oil firm and regulatory uncertainty have dampened appetite for exploration of Nigeria’s huge oil and gas reserves, its biggest producer Royal Dutch Shell said yesterday.
In a speech to an oil and gas conference in the capital Abuja, Shell’s director for sub-Saharan Africa Ian Craig said Nigeria could produce 4mn barrels of oil per day (bpd) but that major changes would be needed for this to happen.
“We still face major challenges ... (there is) chronic under-funding of the onshore Joint Ventures where NNPC (the national oil company) is the majority shareholder,” Craig told the conference.
“The greatest challenge however is the massive organised oil theft business and the criminality and corruption which it fosters. This drives away talent ... increases costs, reduces revenues both for investors and the government and results in major environmental impacts,” he said.
He added that losses of oil to theft in Nigeria was currently in the region of around 150,000 barrels per day.
Thieves in the oil-rich Niger Delta use explosives or even just hacksaws to cut open pipelines and siphon out oil, a practice known as bunkering that hurts production and is thought to be part of a large international criminal enterprise.
Since an amnesty for militants in 2009, attacks on oil facilities have become much rarer and less destructive, but those on pipelines to steal the oil in lucrative bunkering operations remain a costly headache.
Uncertainly in the regulatory framework will only be cleared up by the Petroleum Industry Bill, aimed at changing everything from fiscal terms to an overhaul of the state oil company, but which has been stuck in the National Assembly for years.
It shows no sign of being passed soon. President Goodluck Jonathan said last month he expects a final version to be submitted to parliament by the end of this month, but nothing has surfaced yet.
“The challenges I have described in the onshore, shallow water and gas sectors have held back development and have unfortunately led to a reduced appetite for exploration,” Craig said.
The rise of Angola had proven that Nigeria’s oil development was well below potential, he said.
Oil Minister Diezani Alison-Madueke said in a speech Nigeria was currently producing around 2.5mn bpd of combined crude oil and condensate and this will soon increase by 180,000bpd.
Refinery utilisation capacity would increase to 90% in the next two years after maintenance was completed by the original construction companies, she added.
Nigeria has for decades milked profits from crude exports rather than investing in local downstream infrastructure and refining capacity has fallen in the last decade, despite several government promises and missed targets.
“A major enhancement of deepwater oil production was achieved as a result of the arrival of the FPSO Usan into the Nigerian waters ... in a few weeks oil production will increase by about 180,000 barrels per day,” she added.
French energy major Total said on Monday production from its Nigerian Usan offshore oil project would begin next month.
Source: Reuters
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