Shell eyes $4bn onshore Nigeria push

Nigeria ambition: Shell CEO Peter Voser outlines plans for more investment in West Africa

Shell could be throwing $4 billion behind onshore oil & gas projects in Nigeria in the next few years, chief executive Peter Voser said.

The Anglo-Dutch supermajor has, however, highlighted the security concerns associated with operating in the West African energy powerhouse with an estimated total of 150,000 barrels of oil and condensate a day stolen in the area.

In a briefing to investors on Wednesday, published on Shell’s website, Voser also said “there are no easy answers” to the security issue in Nigeria as production shut-ins actually abet oil thieves.

Voser said Shell is assessing onshore projects in the country to add new production and reduce flaring. These could cost a combined $4 billion on a 100% basis and would be completed by 2014 or 2015, subject to approvals and the security situation.

“The overall security situation in Nigeria has been improving, following the government amnesty in the Niger delta in 2009,” Voser said, referring to a governmental amnesty offered to militant groups which has led to a large drop in attacks on oil and gas infrastructure.

“This has allowed the SPDC joint venture to ramp up production to some 800,000 barrels of oil equivalent per day in 2011 from around 460,000 boepd in 2009.”

Voser continued, however: “There are some worrying trends however. During 2011 we started to see an increase in large scale oil theft and illegal refining. This has resulted in production stoppages and environmental damage.

“Sadly, this year has also seen a return to violence in some areas, with two SPDC contractors shot and killed while on an environmental survey during a remediation project.

“The oil theft and illegal refining is at large scale, with tank farms, barge building operations and barges shuttling crude to waiting tankers offshore.

“In fact the oil theft was so prevalent we could not ensure the safety of our operation and shut in 25,000 barrels a day of production during part of 2011.”

Shutting in production is far from ideal, Voser said, as, once pipelines are depressurised, “it is easier for thieves to install valves to steal from both the oil in the pipeline and when production is re-started. This perpetuates the cycle.”

Voser pointed to estimates of around 150,000 barrels a day of oil and condensate being stolen in Nigeria, “worth some $7 billion at current market prices”.

Shell has often found itself at the centre of controversy over oil spills in Nigeria, but has consistently blamed a large proportion of them on oil theft and illegal refining activities.

“In 2011 there were some 200 new spills, two thirds of which were caused by sabotage or oil theft,” the chief executive continued.

On its global plans going forward, Voser said: “I do expect a slight increase in emissions in the next years however, as we increase our oil & gas production across the company.

“We will continue to look for opportunities to reduce emissions going forward…working on themes like flaring, energy efficiency and carbon capture and storage.”

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