Shell, Eni Declare Force Majeure After Attacks On Oil Facilities In N’Delta

Shell Plc and Eni SpA both declared force majeure on key oil flows from Nigeria, threatening to disrupt supplies in a market already fretting about the impact of Russia’s invasion of Ukraine.

Shell’s measure had been in place since March 3, and applies to its Bonny export programme, a Bloomberg report stated yesterday.

Eni’s relates to Brass crude cargoes and followed a pipeline blast in the Bayelsa state in the country’s Niger Delta.

Force majeure is a legal step that allows companies not to meet contractual obligations for reasons that are out of their control.

Shipments of the two grades had been planned at a rate of 170,000 barrels a day next month but have been in a state of decline over the past few years, according to loading programmes seen by Bloomberg. Flows back in 2020 were planned at about 320,000 barrels a day.

A force majeure doesn’t necessarily mean the entirety of supply would be lost for a given period of time as stored cargoes could still be shipped and repairs would allow shipments to resume.

The market is closely watching what would happen to Russian oil supply in the wake of the country’s invasion of Ukraine.

Some oil companies have stopped buying new cargoes from Moscow and some governments have announced that they are imposing bans on petroleum imports from Russia. Shell has said it will try to go elsewhere for barrels.

The lost shipments could be significant for Nigeria which was scheduled to export almost 1.5 million barrels a day this month, according to loading plans.

It wasn’t clear when Eni’s force majeure began, but the company said that Nigeria LNG was also affected by its measure.

Eni declared the force majeure on exports, following a blast at a pipeline blast which is being blame on vandalism.

The group said it had cut oil exports from its Brass Export terminal by some 25,000 barrels per day, stressing that the pipeline attack was the second after another blast on February 28 at its Obama flow station led to a production shortfall of 5,000 barrels per day.

“Force majeure has been declared at Brass terminal, Bonny NLNG and Okpai Power Plant.

“All wells connected to that pipeline were immediately shut in whilst river booms and containment barges were mobilised to reduce the impact of the spill,” Eni said in a statement.

The company deferred gas output of 13 million standard cubic metres per day due to the incident, a Reuters report said.

The Eni’s oil terminal was shut down in Nigeria after an attack caused a blast on the facility, a development that will see crude production falling at a time when Nigeria is struggling to pump to its OPEC+ quota.

This was the second such attack on an oil infrastructure facility in Nigeria in three weeks, following a similar incident at Eni’s Obama flow station, Reuters said.

“Force Majeure has been declared at Brass terminal, Bonny NLNG and Okpai Power Plant,’’ according to Eni’s statement.

Nigeria, the largest OPEC producer in Africa, has been struggling for months to increase its oil production as much as its quota under the OPEC+ deal allows.

Thus, Nigeria has been contributing to the tightening of the oil market together with the other OPEC+ producers who either lack the capacity or investments to raise output.

Nigeria is also besieged by frequent oil theft, oil spills, and attacks on infrastructure, which further complicate production and discourage investments from the biggest oil firms in the country.

Nigeria’s quota under the OPEC+ agreement was 1.701 million bpd for February, but the country pumped 1.398 million bpd on average last month, according to OPEC’s secondary sources in the Monthly Oil Market Report (MOMR) for the month.

Currently, Nigeria has not been able to reap the full benefit of its oil production following rising in the international price of the commodity due to it’s inability to fully ramp up production to meet its OPEC quota as well as an opaque fuel subsidy system.