Who are the Oil Majors Exposed to Nigeria Attacks?

(Bloomberg) – Royal Dutch Shell Plc and Exxon Mobil Corp. are the international oil companies most exposed to violence in the Niger River delta that has cut Nigeria’s output and fueled a rally in global crude prices, according to Rystad Energy.

Shell and Exxon have the most production in vulnerable parts of the oil-rich region — onshore or near the coast, according to Per Magnus Nysveen, senior partner and head of analysis at the Oslo-based consultant. Shell is losing almost all of the 50,000 barrels a day it pumped in the delta last year, he said. That’s about a quarter of its output in the country. Exxon pumped 145,000 barrels a day last year – about half its Nigeria total – from shallow-water fields that could also be targeted, Nysveen said.

The delta has been rocked by attacks since February that have cut Nigeria’s output to the lowest in almost three decades. A previous outbreak of violence abated in 2009 after the then government offered pardons and monthly stipends to fighters willing to disarm. President Muhammadu Buhari has reduced those payments as part of an anti-corruption drive, prompting militants, now calling themselves The Niger Delta Avengers, to retaliate.

In February, Shell declared force majeure – a legal clause that allows it to stop shipments without breaching contracts – after militants blew up a pipeline feeding the Forcados terminal, which typically exports about 200,000 barrels a day from multiple producers. Shell’s deep-water Bonga field hasn’t been affected by the attacks.

“We continue to monitor the security situation in our operating areas in the Niger Delta and are taking all possible steps to ensure the safety of staff and contractors,” a Shell spokesman said by email. “We do not wish to go into details. Our operations are continuing.”

Qua Iboe

Exxon’s Qua Iboe terminal, which handled 342,000 barrels a day last year, may also face disruptions because of its vulnerable onshore location or if fields that supply it come under attack, Nysveen said.

“There is a risk that these Avengers will now start to be more active,” in the shallow waters which is “a little outside the area where they’re normally operating,” Nysveen said by phone.

“Production activities continue,” Exxon said by email, adding that it has “plans in place to assure the security of our personnel and assets.”

Deepwater Unaffected

Shell began a divestment program in 2009 which saw it and partners Total SA and Eni SpA pull out of many of the blocks that feed the Forcados terminal, Gail Anderson, research director at Wood MacKenzie, said by phone. “The insecurity in that region no doubt played a part in that,” she said.

The heaviest toll is being paid by the Nigerian National Petroleum Corp., which is losing 200,000 barrels a day, Nysveen said. The state enterprise produced 580,000 barrels a day last year from onshore and shallow waters in the delta, he said.

Deep-water areas, where Shell and Exxon have significant operations, have so far been unaffected. “Nigeria will become increasingly reliant on that production if we see an escalation of violence,” Anderson said. The country pumped about 35 percent of oil or liquids from deep-water sites before the violence, she estimates.

The International Energy Agency estimates Nigeria’s oil output declined to 1.62 million barrels a day in April, a 10 percent drop from last year.

“In the worst case scenario, Nigeria may lose more than one million barrels of production,” Nysveen said.

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