Shell Petroleum Development Company SPDC said its share of production, onshore and offshore, in Nigeria dropped to 258 thousand barrels of Oil equivalent (boe/d) in 2016 when compared with 278 thousand boe/d in 2015 on account of security issues including sabotage and crude oil theft in the Niger Delta.
This was contained in its global annual report released last week. The report highlights some challenges the company has had to deal with in its operations both onshore and offshore Nigeria.
“In our Nigerian operations, we face various risks and adverse conditions which could have a material adverse effect on our operational performance, earnings, cash flows and financial condition.
“These risks and conditions include: security issues surrounding the safety of our people, host communities and operations; sabotage and crude oil theft; our ability to enforce existing contractual rights; litigation; limited infrastructure; potential legislation that could increase our taxes or costs of operations; the effect of lower oil and gas prices on the government budget; and regional instability created by militant activities. There are limitations to the extent to which we can mitigate these risks”.
The company said that although the level of crude oil theft decreased in 2016 compared with 2015, a substantial increase in the level of sabotage was reported as a result of the Forcados export line attacks, which led to a significantly higher overall production loss than in 2015,” says the report.
In onshore Nigeria, SPDC is the operator of a joint arrangement (Shell interest 30%) with the Nigerian National Petroleum Corporation that has 17 other Niger Delta onshore oil mining leases (OML), which expire in 2019.
These include OML 25 which is held for sale subject to the resolution of pending litigation. Of the Nigeria onshore proved reserves, 164 million boe are expected to be produced before the expiry of the current licences, and 377 million boe beyond.
In its offshore operations carried out by Shell Nigeria Exploration and Production Company Limited (SNEPCO, Shell interest 100%), which has interests in four deep-water blocks, under PSC terms.
SNEPCO operates OMLs 118 (including the Bonga field, Shell interest 55%) and 135 (Bolia and Doro, Shell interest 55%) and has a 43.75% interest in OML 133 (Erha), where it is not the operator, and a 50% interest in OPL 245.
Shell says challenges facing its operations include litigation as in OPL 245. “Authorities in various countries are investigating our investment in Nigerian oil block OPL 245 and the 2011 settlement of litigation pertaining to that block.
“On January 27, 2017, the Nigeria Federal High Court issued an Interim Order of Attachment for oil block OPL 245, pending the conclusion of the investigation. The company has applied to discharge this order on constitutional and procedural grounds,” says the report.
Shell says it will continue to provide transparency of spills management and reporting, along with deployment of oil-spill response capability and technology.
Olusola Bello
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