At least one source of Nigerian oil exports is set to come back online after Royal Dutch Shell lifted its force majeure on Bonny Light crude exports.
The Nembe Creek Trunk Line was repaired and reopened, allowing Shell to resume exports of its oil, nearly a month after declaring force majeure. Nembe Creek is one of a handful of key pipelines that helps Nigeria brings its oil to the coast for export.
Latest sobering government figures reveal that the economy fell into recession by just over 2 percent in the second quarter.
The overall decline of Nigeria’s economy is – gross domestic product (GDP) fell 2.06 percent in the second quarter – largely attributed to the global drop in the price of oil, which saw growth of -17.48 percent in real terms in the same period and the decline on overall oil production due to militant attacks
The cause of the August outage was not reported on – the pipeline’s operator, Aiteo, said it was from a leak but did not disclose the cause, but the Niger Delta Avengers had been assaulting the oil industry since February, successfully knocking off more than 700,000 barrels per day for much of this year.
“We have listened carefully and halted hostilities in the Niger Delta; we expect a genuine and positive attitude to restructuring and self-determination for every component unit of Nigeria,” the Avengers wrote in a statement on August 29.
The cessation of hostilities could pave the way for a return of a large volume of oil to the international market, adding hundreds of thousands of barrels per day to global supplies.
The Nigerian army reportedly arrested two key militants responsible for the attacks on key oil pipelines in the region, including the leader of the Niger Delta Avengers. The arrest comes only days after the Avengers said that they had ceased operations, deciding against further attacks on Nigeria’s oil infrastructure.
There are reasons to doubt that such a scenario will happen. There was a ceasefire in June between the government and the Niger Delta Avengers, which raised hopes that a substantial volume of oil production could return in short order. The prospect of more Nigerian supply helped push oil prices down from their highs at $50 per barrel.
The hope of peace could once again be a mirage. However, if the Avengers cease attacks, and oil companies can make repairs to infrastructure and various force majeure declarations are lifted, Nigeria could present downside risk to oil prices.