IOCs count losses in Nigeria as crude oil theft surges

International Oil Companies (IOCs) operating in Nigeria are counting heavy losses as the surge in crude oil thefts and supply disruption have impacted on their earnings.

Royal Dutch Shell’s second-quarter profit excluding one-time items and inventory changes slumped to $4.6 billion in the second quarter from $5.7 billion a year earlier, Shell said Thursday in a statement.

Italian oil major Eni SpA (ENI) also reported a 55 percent plunge in its net profit in the second quarter, partly due to disruptions in Nigeria.

The company, which was previously targeting output growth this year, has cut its annual production target, saying it now expect oil and gas production to be in line with 2012.

“Performance (in Q2) was affected by force majeure events in Nigeria, particularly significant, and in Libya”, Eni said Thursday.

Peter Voser, chief executive officer, Royal Dutch Shell, said in a statement on its second quarter 2013 results and second quarter interim dividend announcement: “Higher costs, exploration charges, adverse currency exchange rate effects and challenges in Nigeria have hit our bottom line. These results were undermined by a number of factors – but they were clearly disappointing for Shell.”

Oil theft and disruptions to gas supplies in Nigeria are causing widespread environmental damage, and could cost the Nigerian government $12 billion in lost revenues per year. “We will play our part, but these are problems Shell cannot solve alone”, Voser said.

Shell, which has already sold some of its assets since 2010, will sell at least four more oil blocks in Nigeria in its latest divestment from Africa’s top oil exporter, three oil industry sources familiar with the deals said on Wednesday, Reuters reported.

In what is a confirmation of this, Voser said yesterday: “We have recently launched strategic portfolio reviews in both Nigeria onshore and North America resources plays, which will lead to further focus and divestments there, as we continue to shape the company for the future.”

The blocks to be sold off are Oil Mining Licences (OMLs) 13 and 16 onshore the Niger Delta, and OML 71 and 72, which are in shallow water, the sources told Reuters.

OML 13 covers a large geographical area and has big gas reserves, while OML 16 is a much smaller asset, sources said. OML 72 has proven oil reserves of around 120 million barrels, while OML 71 has significantly lower reserves, one source said.

The blocks are in joint ventures, with the Nigerian National Petroleum Corporation (NNPC) owning 55 percent; Shell, 30 percent; Total, 10 percent and Eni, 5 percent. In all previous deals, Total and Eni have also sold their shares.

“We just took final investment decisions in big projects in Nigeria but the whole sabotage issue, the stealing of products and also the environmental devastation need to be tackled. It can only be tackled by the Nigerian government leading it with all the industry players in it, the communities in it and also international governments”, Voser added.

It would be recalled that Shell’s Nigerian subsidiary, Shell Petroleum Development Company (SPDC), had on Tuesday said that it lost over 60,000 barrels per day to crude oil theft.

“The impact of the activities of crude oil thieves and illegal refineries on the environment in the Niger Delta and the Nigerian economy is now a crisis situation. At some point this year, over 60,000 barrels of crude was being stolen from SPDC lines every day. The activities of illegal refineries are extremely damaging to the environment. A significant proportion of the stolen crude used in the illegal refineries is disposed of in the environment,” Mutiu Sunmonu, managing director, SPDC and country chair of Shell companies in Nigeria, said at the Nigeria Annual International Conference and Exhibition (NAICE) of the Society for Petroleum Engineers (SPE).

By: FEMI ASU