Oil and Gas News

Exploration & Exploitation News w/e 31/12

Saboteurs blow up Agip oil pipeline in Delta State

Saboteurs blew up an oil pipeline operated by Italy’s Agip in Nigeria’s southern Niger Delta late on Friday, the military said on Saturday. Brigadier-General Wuyep Rimtip, commander of the joint military taskforce in the western Niger Delta, said the pipeline had been attacked between the villages of Odimodi and Ogulagha in Delta state. Agip officials were not immediately available to comment and it was not clear if there was any impact on production. “It was not a militant attack, it was saboteurs because they used dynamite to blow up the pipeline. We have reported it to Agip,” Rimtip told reporters. He said the pipeline ran through an area whose ownership was disputed by communities living in Odimodi and Ogulagha.

Gunmen seize oil services vessel off coast of Nigeria

Gunmen hijacked a vessel belonging to French oil services group Bourbon off Nigeria’s Niger Delta on Sunday as it travelled towards a Royal Dutch Shell offshore oilfield, security sources said. The vessel was carrying four expatriates from Cameroon, Ghana and Lebanon when it was attacked near the Bonny Fairway buoy, a major shipping route for the Nigerian oil services industry, one of the sources said. “It was hijacked by gunmen in about five speedboats. The vessel lost contact with the control room around the Okwori oilfield area near Bonny,” the source, a private security contractor working in the oil industry, told reporters.

 A second security contractor confirmed the vessel had been travelling to Shell’s Bonga offshore field when it was seized. Bourbon officials could not immediately be reached for a comment and no group claimed responsibility. Piracy and kidnapping is common in the Niger Delta, a vast network of mangrove creeks opening into the Gulf of Guinea. Militants who say they are fighting for a fairer share of the region’s natural wealth have blown up pipelines and kidnapped oil workers in a campaign of attacks since early 2006, shutting down around a fifth of Nigeria’s oil output. Criminal networks have taken advantage of the insecurity, carrying out kidnappings and hijackings for ransom. Hundreds of foreigners have been seized over the past three years, but most have been released unharmed after a financial settlement. 

Nigeria’s daily oil production to drop to 1.6 mln barrel

Following the decision by the Organization of Petroleum Exporting Countries (OPEC) to cut production by an additional 2.2 million barrels per day, Nigeria will produce about 1.584 million barrels of crude oil per day by January 1, 2009, far below the 2.29 million barrels per day production estimated in the 2009 budget.  Lagos-base Business Day reported on Thursday that in November, following a 113,000 barrels -per day cut, Nigeria produced 1.903 million barrels per day, according to a figure given in the organization’s Oil Market Report for December.

With another 319,000 barrels per day OPEC cut for Nigeria which takes effect January 1, the nation’s crude oil export will dip to 1.584 million barrels per day. Meanwhile, oil rose just a bit over 40 U.S. dollars on Monday, reinforcing the fact that the Nigerian economy will face turbulent times in 2009.

MEND says Oil War Closer  After Arrest Of Member

The Movement for the Emancipation of the Niger Delta, or MEND, says it is closer to an “all out oil war” following the arrest of a member of the movement and due to the treatment of its detained leader Henry Okah. The Nigerian militant movement in the oil-rich Niger Delta Monday condemned the arrest of MEND member Sobomabo Jackrich as a betrayal of trust. He was arrested in Buguma in southern Rivers state late Sunday by Nigerian soldiers, according to security sources.

However, Jomo Gbomo, MEND spokesman, in a statement  described the arrest as a set-up as Jackrich had been invited to peace talks in Buguma brokered by the elders of Rivers state. “This insult, insincerity as well as the continuous show of bad faith in the handling of Henry Okah’s matter brings us closer to an all out oil war,” Gbomo said in the statement. “MEND is deliberating on its next line of action and the next few days will be decisive,” Gbomo said. Okah is standing trial on charges including treason, gun running, kidnapping and oil bunkering in connection with the insurgency in the Niger Delta. MEND and other militant groups in the Niger Delta have kidnapped more than 250 local and foreign oil workers and destroyed several oil and gas facilities in the region.

Shell Shuts Utogorun Gas Plant 

Royal Dutch Shell Plc’s Nigerian unit shut down its Utorogun gas plant due to technical problems, cutting gas supplies to major power plants, ThisDay reported, citing the head of the Nigerian Gas Company. The plant, which can produce 230 million cubic feet of gas daily, failed on Dec. 26 after its generators broke down, the Lagos-based newspaper said.

The Utorogun plant and Chevron Corp.’s Escravos gas plant are the main sources for gas used by the country’s power plants, the newspaper cited Voka Mukoro, head of the Nigerian Gas Company as saying. Nigerian Gas, which distributes gas from the two plants, has been forced to ration gas supplies from the Escravos plant with further power shortages in the country imminent, the newspaper said.

Oil Eyes $50 For Early 2009

Drops in consumer and corporate spending are about to compounded by high fuel prices as crude is likely to move to $50 or better early in 2009. Both sides in the Gaza conflict have indicated that the fighting could go on for weeks, and there is no reason to believe that the dispute between the parties will not stretch into months. The 2006 Lebanon War went on for more than thirty days. The Middle East conflict and its effect on oil prices is likely to be worsened by a looming military conflict in Nigeria. According to Bloomberg, “The arrest of suspected militant leader Sobomabo Jackrich by the Nigerian military may push rebels into retaliating against the government, the Movement for the Emancipation of the Niger Delta group said.”

Early in 2008, oil experts said that battles inside the country’s borders have cut “around 17 percent of the West African country’s installed output capacity of around 3 million bpd.” Nigeria’s oil reserves rank 10th among the world’s nations, just ahead of the US. In July, the rebel group said it would escalate attacks on oil facilities if it did not receive substantial payments from the central government. With two million barrels of oil produced per day, a shutdown of Nigeria’s oil shipments would be a much bigger issue for crude prices than the current Gaza military conflict. Although it has been less visible than the problems in the Middle East, Venezuela president Hugo Chavez may be working to take control with the entire government, which would put him at odds with a number of powerful opposition parties and could spark a civil conflict. The next few weeks could set the tone for oil prices which could stretch well into 2009.

Will oil prices recover in 2009?

Oil price gyrated wildly in 2008, hitting an all-time high above $147 a barrel on July 3 – followed by four-year lows. The big question now is: Where next? Until the credit crunch saw global markets freeze, demand for oil had been rocketing, mainly because of rapid development in countries such as India and China. However, the financial crisis changed that. Demand plummeted in the latter part of 2008 and global inventories grew. In the third quarter of 2008, US oil consumption shrank by about 1m barrels per day (bpd) – or around 5pc. It is likely to have fallen further in the fourth quarter. To keep the market in balance, Opec cut supply. In December, the cartel, which controls 40pc of global oil output, agreed its deepest cut ever, bringing the total cut in quotas in the second half of 2008 to 4.2m bpd. But even this failed to support the price, which fell almost 10pc in the next two sessions.

 Merrill Lynch oil analyst Francisco Blanch said the oil price could drop to $25 in 2009 if China falls into recession. He put the chances of this happening at one in three. However, he added: “If we reignite economic growth, we will have a shortage of energy again.” In this case, Mr Blanch predicted oil at $150 a barrel in two or three years.Most analysts are downbeat on the oil price in the short term. Deutsche Bank analyst Michael Lewis said: “Many commodity prices are set to overshoot to the downside in response to the worst downturn in economic activity since the Great Depression.” In the long term, low oil prices could be damaging, as they stop investment in the discovery of new sources.   

Geo-political issues may also come into play. The escalation of attacks between Israel and Hamas in Gaza caused a spike in the oil price on Monday. If problems persist in the region this is likely to provide a floor for the oil price in the early part of the year. There are also the actions of the Movement for the Emancipation of the Niger Delta (MEND) in Nigeria. Attacks by the rebels contributed to the oil price spike in early 2008, as the country is the world’s eighth-largest crude oil exporter and the US’s fifth-largest source for imported oil. Major exporters Iran and Venezuela also continue to spar with the US, which could prompt more supply fears.  The outlook for the oil price in 2009 depends on where or not government action to tackle the economic crisis works.   Should the stimulus packages start to work and become reflationary this would be bullish for the price of oil. 

Libya buys six oil tankers for 400 million dollars

Libya’s national maritime transport company announced on Wednesday the purchase of six oil tankers valued at a total of 400 million dollars. The contracts were signed on Sunday and Monday with Korean naval construction group Samsung Heavy Industries and Japanese constructor Sasebo Heavy Industries, company official Tarek Yussef Said told reporters.

Four tankers will be built by Samsung and the other two by Sasebo, he said. The tankers will have a total capacity of 700,000 tonnes, or the equivalent of five million barrels of crude. Headed by Hannibal Kadhafi, son of Libyan leader Moamer Kadhafi, the company exercises a near-monopoly in the transport of Libyan oil. Its fleet currently comprises 18 tankers with a total capacity of 11.8 million barrels. With two million barrels per day Libya is the third largest producer in Africa, after Nigeria and Angola. It plans to increase its production to three million barrels a day by 2013.

Briefs from newspapers across the globe

Tags: exporters, Gas stories, Iran, Libya, MAJOR, Niger Delta, NIGERIA, Nigerian Gas Company, oil output, Oil stories, Pipeline, Venezuela