Shell halts production at Nigerian oil field after attack

ABS-CBN News

Posted at Jun 19 2008 11:09 PM | Updated as of Jun 20 2008 07:09 AM

Agence France-Presse

LAGOS - Militants attacked Shell's main offshore oilfield in Nigeria on Thursday, forcing the Anglo-Dutch giant to shut down production and raising fears for the security of deepsea facilities in the region.

"We shut down production at the Bonga oilfield following an attack by unknown militants this morning," Shell spokesman Precious Okolobo said.

Bonga lies 120 kilometers (75 miles) offshore and has a daily output capacity of 200,000 barrels of oil and 150 million standard cubic feet of gas.

The attack set alarm bells ringing in oil circles as such facilities had been previously considered out of the reach of the armed groups who stage regular raids on installations closer to shore.

"It's very, very worrying," one oil company executive told AFP. "They've hit at the zone most likely to be able to guarantee production. That means that there's no longer any limit on attacks".

An official with the Nigerian National Petroleum Corp. (NNPC) said the government needed to "crack down hard" if confidence among oil majors was to be restored.

Just a few months earlier NNPC's spokesman Levi Ajuonuma had described the Nigeria's offshore fields as "the thing that saves us".

The attack was carried out by the Movement for the Emancipation of the Niger Delta (MEND) -- the best equipped and most organized of the armed groups operating in the Niger Delta.

In a statement, MEND said its main objective had been to blow up the "computerized control room" coordinating operations from the Bonga field but had been unable to access the target.

The militants had then considered setting fire to the facility, but decided not to, in order to "avoid loss of life," the statement said.

MEND said it had kidnapped a US national, whom it identified as Captain Jack Stone, but added that it intended to release him later in the day.

World oil prices jumped to 137 dollars a barrel, within reach of record heights, on the back of the news. They later pulled back slightly on a stronger dollar.

Shell started production at Bonga in November 2005. By May 2007, 100 million barrels of oil had already been exported from Bonga.

The Floating Production Storage and Offloading (FPSO) facility is one of the world's biggest.

Shell has a 55 percent interest in Bonga while US giant Exxon Mobil has 20 per cent, the Italian Agip 12.5 per cent and Elf Petroleum Nigeria, part of the French Total group, 12.5 per cent.

The attack was the latest in a series targeting Shell, which last week said it would not be able to honor June and July contracts from its Bonny terminal after MEND sabotaged key crude supply pipelines.

Shell had already declared a force majeure for April and May deliveries following the attack.

Violence in the southern Delta region has reduced Nigeria's total oil production by a quarter since January 2006.

Nigeria was until recently Africa's largest producer until it was overtaken in April by Angola, according to Organization of Petroleum Exporting Countries (OPEC) figures.

Angola produced 1.873 million barrels per day on average in April, trumping the 1.818 million bpd produced by Nigeria.