Shell says records 50% drop in oil spill in Nigerian fields, theft remains major challenge

Lagos (Platts)--12Apr2013/551 am EDT/951 GMT

Shell said it reduced by 50% the volume of oil spills from its onshore operations in Nigeria's Niger Delta in 2012 compared with the previous year, but that oil theft from the company's facilities remain a long-term challenge.

"The volume of operational spills onshore from SPDC [Shell] facilities improved again in 2012, falling to 200 mt, a drop of over 50% from the previous year," Shell said Friday in a report on the company's activities in Nigeria last year.

"Oil theft, a long-term problem, escalated [in 2012]. As a result, production was around 20% below capacity in SPDC onshore facilities due to pipeline shutdowns resulting from crude oil theft,' the oil giant said.

Shell said an estimated 26,000 barrels of oil were spilled in from its facilities last year of which around 95% was due to sabotage and oil theft.

The country head of Shell companies in Nigeria, Mutiu Sunmonu, said in the report that oil theft, or "bunkering" as it's known locally, had become a well-financed and highly organized criminal enterprise, with most of the stolen oil ending up in refineries in other parts of West Africa and Europe and beyond.

Large scale oil theft has become a major headache for the Nigerian government and multinational oil companies. The OPEC member loses around 150,000 b/d of oil production to theft according to industry estimate. Nigeria's senior oil workers' union Pengassan last week threatened to shut down production facilities if the government failed to toughen up security in the oil-producing Niger Delta.

Union president Babatunde Ogun said Nigeria was losing over $6 billion a year to oil theft, which he said was a "threat to our national security." Financial advisory group Renaissance Capital has already lowered projected Nigerian oil production to 2.30 million b/d from 2.45 million b/d owing to the increase in oil theft, with grave implications for government's revenue target of Naira 3.9 trillion ($24.7 billion) for 2013.

Shell also said in the report that gas flaring from the company's Nigerian oil fields fell in 2012 by 25% from the previous year, adding planned additional $4 billion investments to develop new oil and gas fields would further help reduce Shell gas flaring intensity to be below the current global industry average.

Shell also said that Nigeria earned $42 billion revenues from the company's operation between 2008 and 2012, while the Anglo-Dutch oil giant also paid $5.2 billion in tax to the Nigerian government during the same period.

--Staff, newsdesk@platts.com
--Edited by Maurice Geller, maurice_geller@platts.com

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