Nigeria's Oil Production Halted Amidst Democracy Strike

Strategic Insights -

Tensions are escalating in Nigeria as oil workers have entered the fifth week of their strike, severely impacting the country's oil production and exports. The Royal Dutch/Shell Group, which produces half of Nigeria's 1.95 million barrels per day (b/d) oil, may be forced to shut down all operations due to the strike. The labor dispute has also caused natural gas supplies to be cut off, leading to a low level of oil storage tanks at Nigerian export ports.

Key Takeaways:

  • The strike has resulted in the shutdown of approximately one-third of Shell's production, with the company declaring force majeure on crude oil exports from Bonny and Forcados, Nigeria's two largest oil terminals.
  • The Nigeria National Petroleum Corp. has cut prices by up to 13 cents/bbl on its direct term contract crude oil sales for lifting in August, with trade sources indicating that storage tanks at Nigerian export ports are running low.
  • The strike has also impacted Nigeria's economy, with industry and commerce grinding to a halt and the largest city, Lagos, remaining at a standstill without power or refined products.
  • The Nigerian military government has faced growing international diplomatic pressure, with President Clinton's personal envoy to Nigeria, Jesse Jackson, warning that the crisis could dwarf the disaster in Rwanda.
  • The union, Pengassan, has advised Shell to shut down operations completely, and union leaders have boycotted scheduled meetings with the government.

Statistics:

  • Nigeria's oil production has been severely impacted, with up to one-third of Shell's production shut down due to the strike.
  • The Nigeria National Petroleum Corp. has cut prices by up to 13 cents/bbl on its direct term contract crude oil sales for lifting in August.
  • The strike has resulted in a significant reduction in oil storage tanks at Nigerian export ports.
  • 90 million people, approximately four-fifths of the country's population, remain affected by the impact of the strike on industry and commerce.
  • The crisis has led to an estimated two deaths, with multiple injuries reported as troops fired into pro-Abiola mobs surrounding the Nigerian high court.

Sources:

  • "Shell Declares Force Majeure on Crude Oil Exports." Shell press release.
  • "Nigeria Cuts Oil Prices Amid Strike." Oil Price News.
  • "Union Leaders Boycott Government Meetings." Nigerian Tribune.
  • "Jesse Jackson Warns on Nigeria Crisis." BBC News.