Nigeria’s crude oil exports  to hit 1.8 million b/d in June

Nigeria’s crude oil exports will climb to 1.8 million barrels per day (b/d) this month as Shell announced on Wednesday, 7 June that it  is lifting  force majeure on exports of Nigeria’s Forcados crude oil. Nigeria’s crude oil exports averaged 1.4 million b/d before now, excluding condensates.

Force majeure is a legal declaration that means the operator cannot fulfill a contract due to circumstances outside its control. With the lifting of the force majeure, it means that Shell is assuring its customers that it can now guarantee supply of crude from the Forcados pipeline.

The Trans Forcados Pipeline (TFP) and export terminal located in Delta State, has been closed since February 21, 2016 when it was first attacked by militants.

It opened briefly in November of 2016 before it was attacked again, which led it to be shut down again until now.

Nigeria lost billions of naira in oil revenues for the almost 16 months that the Forcados pipeline was closed. The Nigeria Petroleum Development Company (NPDC), a subsidiary of Nigerian National Petroleum Corporation (NNPC) reported losing as much as N20 billion monthly for the period the pipeline was closed.

Several indigenous players also had their operations impacted, while the Minister of Power, Works and Housing, lamented that the  closure of the pipeline cost the country about 3,000MW of lost electricity supply due to the disruption in gas supply.

Indigenous players in Nigeria’s upstream oil and gas sector, including Seplat, First Hydrocarbon, Nigerian Petroleum Development Company, Pan Ocean, Midwest Oil and Gas, Neconde and Aiteo  have expressed  excitement  with the return of  the Trans Forcados Pipeline but have also urged the government to ensure that the terminal operations are no longer interrupted by  militant activities.

Attacks on Forcados were the most determined and also the most impactful, crippling the ability of both Shell and some indigenous operators, including Seplat, Midwestern, Neconde and NPDC to move crude along the pipeline.

The absence of Forcados pipeline forced indigenous operators to seek alternative routes to move crude oil from the Niger Delta. Some began pumping their crude through barges. Seplat pursued alternative crude oil evacuation options through the Warri refinery, shipping over three million barrels through that route. Many suffered huge losses and were unable to service their debts.

The resumption of Forcados, which typically exports 200,000-240,000 barrels per day (bpd), should bring Nigeria to around the 1.8 million-bpd level, which the government said it wanted to achieve before joining OPEC output cuts, from which it is now exempt.

Forcados had been under force majeure since February 2016 after a militant attack on the main export route, the Trans Forcados Pipeline. Despite a brief resumption in the autumn of 2016, militants struck again and force majeure was not lifted.

Last week, Shell issued a loading programme for June exports that lifted planned exports from Nigeria to 1.75 million bpd, taking it to at least a 15-month high.

On Wednesday, one trader told Reuters that the programme had been revised higher to 252,000 bpd, putting crude oil exports for the month at 1.8 million bpd.

“The Shell Petroleum Development Company of Nigeria Ltd (SPDC) lifted the force majeure on crude oil exports from Forcados Terminal,” the firm said in a statement on Wednesday, adding that the move was effective from 4 p.m. (1500 GMT) on Tuesday.

“SPDC is grateful to various stakeholders, particularly the Federal and Delta State governments, security agencies, NNPC and communities for their support in the repair of the three sabotage leaks on the pipeline,” it said.

The lifting marks the first time in 16 months that all of Nigeria’s oil grades were free of loading disruptions severe enough to require force majeure.

The Organisation of the Petroleum Exporting Countries and some other producers agreed last month, to extend output cuts of about 1.8 million bpd until March. The initial six-month deal had been due to expire at the end of this month.

Nigeria and Libya, whose output has been disrupted by unrest and other factors, were both exempted from the curbs. The return of Forcados  is a major boost to Nigeria’s revenues in 2017, which has come under significantly pressure recently, forcing the government to increase its borrowing in both the domestic and international markets.

Analysts at Financial Derivatives say Forcados return is good news for Nigeria. “Forcados terminal will resume with capacity of 300,000 bpd and oil production expected to increase to support external reserves, it will also improve power (associated gas),” states a note from the firm sent to BusinessDay.