Amnesty - Shell's Reentry Boosts Oil, Gas Output Figures

Nov 26, 2009 (Daily Champion/All Africa Global Media via COMTEX) --
RD | Quote | Chart | News | PowerRating -- Shell's reentry into the Niger Delta has started yielding expected jumps in production figures as the oil giant prepares to reclaim its status as Nigeria's lead oil and gas producer. Shell Petroleum Development Company (SPDC) weekend declared record gas production for the nation's internal distribution grid targeted at meeting rising industrial and commercial demands in the domestic market.

The gas production record came as the company is also expected to resume crude oil export from operated Sea Eagle floating production, storage and offtake vessel which produces the 115 barrels per day Eastern Area (EA) conventional offshore field. The SPDC Joint Venture achieved the record production from four gas plants - Utorogu, Oben, Sapele and Ughelli East. Sapele and Oben had been shut in since late last year because of attacks on the pipeline infrastructure. With the repair of the pipelines this year, the two gas plants have since resumed production.

At Utorogu, SPDC Joint Venture executed engineering and production optimisation activities including capacity upgrade and focused gas wells deliverability tests which enabled the facility to increase output and improve gas quality. In a statement weekend Shell said it produced a total of 512 million standard cubic feet of gas (MMscf/d) in Western Niger Delta on November 18, 2009 as against previous production figure of 300 MMscf/d. The statement said the gas production level was the highest in two years from the area.

The gas, Shell said, would go into the domestic gas network for national power generation and manufacturing industries. Prior to this time, average gas production from SPDC's Western operations had been 300MMscf/d and scarcely met internal demands from facilities relying on the company's operations for fuel and gas feedstock. Managing Director of SPDC, Mr. Mutiu Sunmonu, said: "The latest achievement consolidates our position as Nigeria's leading gas producer. What is more, this has been done safely, without harm to people and the environment.

We are pleased that all the gas has been used for domestic power generation and manufacturing, as these are key sectors for national economic growth." Operations Manager, Land West Chidube Nnene-Anochie said: "This feat was achieved through integrated efforts of Operations/Maintenance and multi-disciplinary support teams (Development, Wells, Engineering, HSE, Finance, Contracting, Pipelines) and we are all committed to sustaining the tempo."

The statement said SPDC Joint Venture pioneered domestic utilisation of natural gas in Nigeria in the 1960s through supply to industries in the Port Harcourt, Trans-Amadi and Aba areas. It added that the company also remained the only supplier of gas to the domestic market until about 1998. "Over the past few years, the SPDC Joint Venture has been producing on average about two thirds of Nigeria's total domestic gas volumes mainly for power generation. "In October 2008, the SPDC Joint Venture brought on stream the 240MMscf/d-capacity Okoloma Gas Plant in the Eastern Niger Delta that has been supplying gas to Afam power plant. Afam power plant achieved 442MW in July 2009."

The record gas output is part of the results of Shell's field reentry program after it fled its production site for two years due to militant attacks in the Niger Delta. Business Champion reports that Shell has rushed to restore some of its shut in production in the country, taking advantage of the ongoing ceasefire adopted by militant groups to restore over 800,000 barrels of oil per day (bpd) of production shut in for security reasons. Shell's African Executive, Ann Pickard, had said that the Soku gas plant, shut down after sabotage, was restarted on October 15. "We are trying to bring back as much capacity as we can as quickly as we can," Pickard said. "We are repairing pipelines."

On the amnesty deal to militants offered by President Umaru Yar'Adua, Picard said: "The amnesty has been well supported. So far so good, not a single militant-related incident," since the cease-fire. SPDC has also resumed oil production at its 115,000 bpd East Area (EA) oilfield, one of the fields shut in due to militant attacks. The field was shut down in 2006 following a series of attacks on the facility and abduction of oil workers. The field was reopened in July this year only to be shut in again in early-September.

A Shell spokeswoman, Caroline Wittgen, confirmed the resumption of production at the facility to Reuters, saying: "We can confirm production from the EA oilfield has resumed on November 8 and is ramping up." The restart would be seen as a further positive step for the Niger Delta's improving security situation after the recent offer of an amnesty to militants by President Umaru Yar'Adua in a bid to quell unrest and violence.

A Shell source said the restart of EA was due to the completion of repairs on the field's Sea Eagle floating production, storage and off A-loading vessel (FPSO Sea Eagle). The spokesman said the Sea Eagle began pumping again on earfly November after work on emergency shutdown valves and gas compression equipment.

Shell lifted force majeure on EA in September and crude exports are set to hit 92,000 bpd in December, the highest volume since the output outage. Nigerian crude exports are set to increase in December to 1.97 million bpd from 1.92 million this month, the highest volume since July.

Total Nigerian capacity is more than 3.5 million bpd but attacks on oil facilities have hit output by more than 30percent. December's export volumes will keep Nigeria's output well above its 1.67 million bpd output target in the Organization of Petroleum Exporting Countries (OPEC), but the Director of Department of Petroleum Resources (DPR), Mr. Billy Agha, explains that part of the output was condensate which is not included in OPEC's production restrictions. President Umaru Yar'Adua has approved 200 billion naira ($1.34 billion) in federal funding to build roads, hospitals and schools in the oil-producing Niger Delta.

The funding is the latest effort by the president to develop the impoverished region and halt years of unrest that has slashed oil and gas production. Minister of Information, Prof. Dora Akunyili, said "The projects range from the construction of bridges, roads, hospitals and schools." A presidency source said the money would come out of the federal government's share of a $2 billion economic stimulus package released earlier this month.

Violence has subsided over the past few months after thousands of gunmen accepted Yar'Adua's offer of amnesty. However, activists fear the former militants could resume attacks if the government fails to quickly find them work.

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