Key Nigeria Crude Oil Flows Disrupted as Pipelines Are Curtailed

LAGOS (Capital Markets in Africa) –  Royal Dutch Shell Plc declared curbs on the flow of Nigeria’s Bonny Light crude, disrupting post-conflict recovery in the West African country’s oil industry.

Shell’s local unit on Thursday declared force majeure on Bonny Light exports following the shutdown of the Nembe Creek Trunk Line by the operator, Aiteo Eastern E&P Co. It came just days after loadings of the country’s Forcados crude were said to be delayed. Forcados and Bonny are Nigeria’s third and fourth biggest export streams respectively, with combined shipments about half a million barrels a day, Bloomberg tanker tracking shows.

“If the outage is prolonged, it will definitely help reduce the light sweet overhang in the Atlantic Basin,” said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. in London. With U.S. exports at a record, the Atlantic Basin is filled with light sweet crude, and there are still lots of unsold Nigerian cargoes for June, she said.

Nigeria’s crude production has been recovering after disruptions by militant attacks in 2016. Africa’s largest oil producer at full capacity was scheduled toload about 1.9 million barrels a day next month, the second-highest volume this year. Shell on Thursday said force majeure, a legal clause enabling the suspension of deliveries, took effect on Bonny Light as of 8 a.m. Nigerian time. Last week, loadings of Forcados were said to have been delayed by 5 to 8 days, and Reuters later reported that the country’s Trans-Forcados pipeline was shut by a leak.

Nigeria, along with fellow African producer Libya, was exempted from the OPEC-led output cuts that kicked in at the start of last year, in order to allow them to recover from years of internal strife. The Organization of Petroleum Exporting Countries and 10 non-member nations have been curbing supply to end a global glut in oil inventories.

Still, Nigeria and Libya’s support was important to OPEC’s decision to extend the production curbs until the end of 2018. The two countries agreed to limit their combined output to 2.8m b/d from Jan. 1 this year, which they have done so far, according to Bloomberg calculations from OPEC’s preliminary, secondary-source estimates.

On Wednesday, the Paris-based International Energy Agency said OPEC and its allies have finally succeeded in their campaign to clear the glut, with inventories in developed countries falling below their five-year average for the first time since 2014. Markets are set to tighten further as output sinks in Venezuela and the U.S. re-imposes sanctions on Iran.

The tightening market has driven up prices, with global benchmark Brent crude on Thursday rising above $80 a barrel for the first time since late 2014.

Source: Bloomberg Business News