Nigeria’s faltering oil production is further set to decline as over 170,000 barrels per day capacity is expected to be shut out as Shell and Eni SpA declare force majeure on critical Nigerian oil shipments.
Shell declared force majeure on March 3 at its Bonny export terminal which on normal days could ship about 250,000 barrels per day. Due to production shut-ins occasioned by industrial-scale stealing of crude, production has fallen by half.
In the case of ENI, it halted exports of the Brass crude cargoes following a pipeline explosion in Bayelsa state.
Force majeure is a legal provision that permits businesses to avoid contractual obligations due to circumstances beyond their control.
The removal of over 170,000 barrels per day from the global oil market further compounds supply disruption occasioned by the Russian invasion of Ukraine which precipitated sanctions that have roiled oil markets.
For Nigeria, the lost cargoes represent a significant loss of revenue. For months, Nigeria has struggled to meet the OPEC quota with production hovering around a 1.3million barrels per day when it is permitted to supply above 1.5million bpd.
Read also: A new era of oil order: How prepared is the world?
Bloomberg reports that the country was set to export about 1.5 million barrels per day this month citing load plans.
According to loading programs reviewed by Bloomberg, shipments of the two grades had been anticipated at a rate of 170,000 barrels per day next month, but have been on the slide for the past few years.
A declaration of force majeure does not always imply that the entire supply chain will be disrupted for an extended length of time.
Cargoes that had been stored may still be shipped, and repairs would allow for the resumption of shipments.
The market is keeping a careful eye on Russian oil supplies in the aftermath of the country’s invasion of Ukraine.
Some oil corporations have ceased purchasing fresh cargoes from Moscow, and some governments have announced prohibitions on Russian petroleum imports. Shell has stated that it will look for barrels elsewhere.
The start of Eni’s force majeure remained unclear. The company said that Nigeria’s LNG is also affected by its measure.
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