Shell moves to Nigerian offshore fields amid onshore woes

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At Royal Dutch Shell Plc’s (RDSA) compound in the Nigerian city of Warri, the gate is locked, the grounds are empty and grass has overgrown since Europe’s biggest oil company closed its operations in March after more than 40 years, reports Bloomberg.
After Warri saw some of the nation’s worst unrest in two decades, Shell has sold land-based fields that pumped about 400,000 barrels a day in the 1990s, valued at $1.2 billion a month at today’s crude prices, and is buying fields offshore.
International oil companies including Shell and Chevron Corp. (CVX) are shifting their efforts in Africa’s largest producer from land-based operations to offshore fields, where the risk of kidnapping, sabotage and crude theft is lower. The increased security also brings costs that are more than 40 percent higher, according to estimates from Nigeria’s national oil company.
“Due to the increased level of oil theft and disruptions, a number of oil companies have started selling blocks in the troubled areas and moving to deep water offshore blocks,” Rolake Akinkugbe, London-based head of oil and gas at Ecobank Research, said in an e-mailed response to questions. “The move offshore is being viewed as a longer-term solution to the challenges faced onshore and in the shallow waters.”
Chevron, the Hague-based Shell, Exxon Mobil Corp. (XOM), France’s Total SA (FP) and Eni SpA (ENI) of Italy run joint ventures with state-owned Nigerian National Petroleum Corp. that pump most of the country’s oil. Shell, the oldest and biggest energy company in Nigeria, sold eight oil leases in three years. San Ramon, California-based Chevron, said last month it wants to sell five fields in shallow waters in the western delta and swamps in the east.
Precious Okolobo, a spokesman for Shell in Nigeria, said he couldn’t comment on the company’s policy regarding onshore and offshore oil fields when contacted. Shell is undertaking “a strategic review” of its Nigerian business and may “exit from the interests it holds in some further onshore leases,” its local unit said in a statement on June 21.
Chevron is reviewing its business plan in Nigeria and adopting new approaches to investment due to the current situation, James Craig, a Houston-based spokesman, said July 24 in an e-mailed response to questions.
Deep-water fields that first began production 10 years ago now account for more than half of Nigeria’s production. With output suspended at about 40 land-based fields after armed attacks, Nigeria has compensated for the loss by increasing offshore projects, according to data from the petroleum ministry. Bonny Light crude, one of the country’s main export grades, rose 0.1 percent to $109.98 as of 8:45 a.m. in London.

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