Nigeria LNG Declares Force Majeure as Soku Plant Shut

By Dulue Mbachu

Nov. 28 (Bloomberg) -- Nigeria LNG Ltd. declared force majeure on cargo deliveries after Shell Petroleum Development Co. shut the Soku gas plant in the southern delta to repair damage caused by thieves.

Shell’s Soku facility contributes 40 percent of Nigeria LNG’s feedstock, Siene Allwell-Brown, a spokeswoman for the liquefied natural gas company, said yesterday in a statement. The thieves had been stealing gas condensate from pipelines.

“Nigeria is a major gas supplier in the world, so any disruptions must be fairly serious” Antony Goldman, an independent analyst focusing on Nigeria, said by telephone from London. Work to tap the “ample” reserves is hampered by unrest in the delta region, which holds almost all the country’s hydrocarbon resources, he said.

Oil and gas producers in Nigeria have in recent years faced militant attacks and thefts from criminal gangs who tap into pipelines to steal crude or refined petroleum products for sale. Assaults by armed groups have cut more than 20 percent of the country’s oil exports since 2006.

When attacks and thefts disrupt output, companies have been forced to declare force majeure, a legal clause that allows them to renege on contractual obligations because of circumstances beyond their control.

‘Social Crisis’

“Increasingly, as far as the oil industry in Nigeria is concerned, it is a multilayered social crisis,” Goldman said.

The Soku plant is part of a joint venture operated by Shell Petroleum Development, Royal Dutch Shell Plc’s Nigerian unit, in which state-owned Nigerian National Petroleum Corp. holds a 55 percent stake. Shell has 30 percent, followed by Total SA with 10 percent and Eni SpA with 5 percent.

The partners are also part-owners of Nigeria LNG, which runs the multibillion-dollar Bonny LNG plant and has long-term contracts with buyers in Italy, Spain, Turkey, Portugal and France.

The plant can produce 22 million metric tons of LNG and four million tons of liquefied petroleum gas a year, using 3.5 billion cubic feet of gas a day at full output, according to the company’s Web site. In addition to its long-term supply contracts, Nigeria LNG also sells on the spot market.

Nigeria’s gas resources, estimated at 187 trillion cubic feet, are the seventh largest in the world.

Nigerian National Petroleum owns 49 percent of Nigeria LNG, Shell has a 25.6 percent stake, Total holds 15 percent and Eni 10.4 percent. Apart from Shell, Total and Eni also supply gas from their Nigerian operations to the Bonny gas plant.

To contact the reporter on this story: Dulue Mbachu in Lagos at dmbachu@bloomberg.net