Shell issues production warning in Nigeria

[August 18, 2010]  LAGOS, Nigeria (AP) -- Royal Dutch Shell PLC cannot meet forecast production on oil coming from Nigeria's restive southern delta after an increase of sabotage on its pipelines, a company spokesman said Wednesday.

Spokesman Tony Okonedo told The Associated Press that the company's Nigerian subsidiary declared "force majeure" on its Bonny Light crude shipments. The term is used when it is impossible for an oil company to cover the promised supply from the field.

Okonedo blamed recent sabotage on pipelines near Bonny in Rivers state for the production warning. Shell said Sunday that the lines bore signs of drilled holes and hacksaw cuts, suggesting that thieves likely had tapped into the lines to siphon off crude oil to sell on the black market.

The subsidiary did not give an estimate of how much crude oil it had lost in the incidents, though it acknowledged the damaged pipelines had leaked crude oil into the environment. The company said it put containment booms into the surrounding waterways to stop the oil flow and hired a contractor to begin a cleanup.

Bonny Light crude, easily refined into gasoline, drives Shell's oil production in Nigeria -- long one of the oil giant's most profitable regions. Shell, which discovered oil in Nigeria 50 years ago in the southern Niger Delta, remains the dominant oil major in the West African nation.

Shell blamed nearly all of its oil spills last year on sabotage from thieves and militants. However, environmentalists and community activists routinely criticize Shell, blaming the company's aging pipelines and indifferent corporate culture for the frequent oil spills.

Upset by the spills and the region's unceasing poverty, militants in the delta have targeted pipelines, kidnapped petroleum company workers and fought government troops since 2006. That violence drastically subsided after a government-sponsored amnesty deal last year, which provided cash payoffs for fighters and the promise of job training. However, many ex-fighters now complain that the government has failed to fulfill its promises.

Nigeria, a member of OPEC, is one of the top crude oil suppliers to the U.S.

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Online:

Royal Dutch Shell PLC: http://www.shell.com/

[Associated Press; By JON GAMBRELL]

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