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African oil powerhouse Nigeria has been rocked by attacks on its oil industry. In fact, the wave of hostilities over energy infrastructure by militants since February has sunk Nigeria’s oil output to a 20-year low of around 1.4 million barrels per day.
Calling itself the Niger Delta Avengers, the main militant group claims that their fight is for the natives of the oil rich Niger Delta to get a bigger share of oil wealth. It is also angry about the winding down of a 2009 amnesty program that paid monthly stipends to disarming militants for safeguarding the installations they once targeted.
The West African nation houses the world’s tenth-largest oil reserve and the commodity contributes substantially to its revenue and foreign exchange earnings. However, the slew of militant attacks have not only knocked out over 50,000 barrels of crude oil output per day from OPEC’s largest African producer but also magnified the impact of low oil prices on Nigeria’s economy.
Energy Companies at Risk
Niger Delta Avengers has warned oil companies working in the region to leave by May 31 and issued a warning last weekend that ‘something big’ is about to happen. The bombing campaign by the group has forced many energy companies to evacuate their staff and wrap up operations.
The most affected is Nigerian National Petroleum Corp., the state enterprise that is losing 200,000 barrels a day.
Meanwhile, let's take a closer look at how the Nigeria crisis is playing out for the big U.S./European energy firms:
In Feb, Royal Dutch Shell plc – operating in Nigeria since 1937 – declared force majeure (or legal indemnity allowing it to stop shipments without breaching contractual obligations) on exports of crude following the bombing of the Forcados subsea pipeline. The damage to the underwater pipeline has forced the Anglo-Dutch major to halt loadings – of around 250,000 barrels a day from multiple producers – to the export terminal. Following a militant threat, Shell has also started evacuating workers from its deepwater Bonga field in the southern Niger Delta, though production is still continuing.
Last month, Niger Delta Avengers attacked the Ogbaimbiri-Tebidaba pipeline belonging to Italian energy company Eni SpA (E - Free Report) . Eni, which operates through the Nigerian Agip Oil Co., said about 4,200 barrels of oil per day of its equity production was cut by the incident. This came days after insurgents attacked the company’s gas pipeline in Ogbembiri, impacting 1,000 barrels of oil equivalent per day.
U.S. energy behemoth Chevron Corp. (CVX - Free Report) saw its 90,000 barrels per day Okan offshore platform – feeding the Escravos export facility – shut down in early May subsequent to an attack. After a few days, the militants damaged an oil pipeline, leading to serious supply disruptions.
Though Exxon Mobil Corp.’s (XOM - Free Report) activities in Nigeria remained unscathed from terrorist attacks, the world’s biggest publicly traded oil company also declared force majeure on exports of Qua Iboe – Nigeria’s largest crude grade – after damage on a pipeline by a drilling rig.
Deepwater Relatively Safe
Till now, the uprising is limited to the onshore fields, while Nigeria’s deepwater areas – to which Exxon Mobil and Royal Dutch Shell have significant exposure – remains largely unaffected. But an escalation of violence could pose significant threat to these areas that account for about 35% of the total production.
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How the Nigeria Crisis Affects Energy Companies
African oil powerhouse Nigeria has been rocked by attacks on its oil industry. In fact, the wave of hostilities over energy infrastructure by militants since February has sunk Nigeria’s oil output to a 20-year low of around 1.4 million barrels per day.
Calling itself the Niger Delta Avengers, the main militant group claims that their fight is for the natives of the oil rich Niger Delta to get a bigger share of oil wealth. It is also angry about the winding down of a 2009 amnesty program that paid monthly stipends to disarming militants for safeguarding the installations they once targeted.
The West African nation houses the world’s tenth-largest oil reserve and the commodity contributes substantially to its revenue and foreign exchange earnings. However, the slew of militant attacks have not only knocked out over 50,000 barrels of crude oil output per day from OPEC’s largest African producer but also magnified the impact of low oil prices on Nigeria’s economy.
Energy Companies at Risk
Niger Delta Avengers has warned oil companies working in the region to leave by May 31 and issued a warning last weekend that ‘something big’ is about to happen. The bombing campaign by the group has forced many energy companies to evacuate their staff and wrap up operations.
The most affected is Nigerian National Petroleum Corp., the state enterprise that is losing 200,000 barrels a day.
Meanwhile, let's take a closer look at how the Nigeria crisis is playing out for the big U.S./European energy firms:
In Feb, Royal Dutch Shell plc – operating in Nigeria since 1937 – declared force majeure (or legal indemnity allowing it to stop shipments without breaching contractual obligations) on exports of crude following the bombing of the Forcados subsea pipeline. The damage to the underwater pipeline has forced the Anglo-Dutch major to halt loadings – of around 250,000 barrels a day from multiple producers – to the export terminal. Following a militant threat, Shell has also started evacuating workers from its deepwater Bonga field in the southern Niger Delta, though production is still continuing.
Last month, Niger Delta Avengers attacked the Ogbaimbiri-Tebidaba pipeline belonging to Italian energy company Eni SpA (E - Free Report) . Eni, which operates through the Nigerian Agip Oil Co., said about 4,200 barrels of oil per day of its equity production was cut by the incident. This came days after insurgents attacked the company’s gas pipeline in Ogbembiri, impacting 1,000 barrels of oil equivalent per day.
U.S. energy behemoth Chevron Corp. (CVX - Free Report) saw its 90,000 barrels per day Okan offshore platform – feeding the Escravos export facility – shut down in early May subsequent to an attack. After a few days, the militants damaged an oil pipeline, leading to serious supply disruptions.
Though Exxon Mobil Corp.’s (XOM - Free Report) activities in Nigeria remained unscathed from terrorist attacks, the world’s biggest publicly traded oil company also declared force majeure on exports of Qua Iboe – Nigeria’s largest crude grade – after damage on a pipeline by a drilling rig.
Deepwater Relatively Safe
Till now, the uprising is limited to the onshore fields, while Nigeria’s deepwater areas – to which Exxon Mobil and Royal Dutch Shell have significant exposure – remains largely unaffected. But an escalation of violence could pose significant threat to these areas that account for about 35% of the total production.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>