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Shell Nigeria Declares Force Majeure On Bonny Light Crude

By on August 23, 2011

Royal Dutch Shell PLC’s (RDSA, RDSA.LN) Nigerian branch, the Shell Petroleum Development Co. of Nigeria, or SPDC, has declared force majeure on Bonny Light exports until October, the company said in a statement Tuesday.

The declaration follows several cases of pipeline sabotage that have caused deferment of production, Shell said.

Force majeure is a term in a contract that can be invoked when conditions beyond the control of the company make it impossible for it to fulfill terms to which it originally agreed.

European Brent crude strengthened on the news to trade more in line with the U.S. benchmark, West Texas Intermediate, traders said.

Brent consistently underperformed WTI by nearly $1.00 early Tuesday, but this narrowed to around 50 cents after the news of the Nigerian disruption emerged.

Since 2006, armed militants in the volatile Niger Delta have attacked several oil pipelines and kidnapped local and foreign oil workers in the region.

Their activities disrupted oil production and reduced Nigeria’s oil output to around one million barrels a day, from over two million barrels a day.

Since relative peace returned to the Niger Delta after a federal government amnesty for armed militants, several cases of attacks on oil pipelines have been reported in the region, causing concern among the international oil companies and the government.

Six separate oil-spill incidents were recorded on the Okordia-Rumuekpe trunk line between Aug. 2 and Aug. 15 this year, while on Aug. 21 further sabotage was reported on the nearby Adibawa delivery line, SDPC said.