Chika Amanze-Nwachuku and Ejiofor Alike With Agency Report
26 June 2009
Lagos — Oil prices rose towards $70 a barrel yesterday following an attack on Shell's Billie-Krakama pipeline in Rivers State by the Movement for the Emancipation of the Niger Delta (MEND).
The damaged pipeline, THISDAY learnt, feeds into pumping stations connected to the Bonny crude terminal.
Prompted by the incident, the oil giant has shut in one of its pipeline junction points, a development which led to a sharp rise in crude oil prices in the international market as traders had expressed concerns about supplies from the region.
US crude futures for August gained 84 cents to $69.51 a barrel by 1406 GMT, having earlier got within 25 cents of $70 a barrel. London Brent crude rose 91 cents to $69.24 a barrel.
Analysts said the effect on prices had been subdued with plenty of spare supply capacity available around the world, as the global recession cut demand for oil.
"The Nigerian attacks have definitely been supportive, but the impact is less in the current economic environment as there's plenty of spare capacity in the oil industry right now. When we were rallying towards $150 a barrel last summer a small sneeze in Nigeria would send the market rallying at least $2 a barrel. There's less of a geo-political premium in prices now," an analyst at VTB Capital in London, Andrey Kryuchenkov told Reuters yesterday.
In an emailed message made available to THISDAY, MEND said: "Cawthorne Channel 1, 2 and 3 flow stations feeding the Bonny export terminal have been effectively put out of service".
A Shell spokesman, Precious Okolobo, who confirmed the attack on the company's pipeline at its Krakrama Manifold, said a team had been mobilised to limit the environmental impact.
He, however, debunked claims by the militants that the company had shut down Cawthorne Channel 1, 2, and 3 flowstations that feed the Bonny export terminals.
He said: "We (Shell) have received reports of an attack on SPDC Pipeline at Krakrama manifold in Eastern operations. The facility has been shut down and emergency team has been mobilised to limit the environmental impact."
A manifold is a pipeline junction where oil gathers for collection.
MEND had vowed to shift its offensive against oil installations located outside Delta and had in the last three weeks claimed responsibility for attacks on oil installations including the Afremo oilfields.
The main militant group had earlier attacked the facility of Italian oil giant, Eni, in Bayelsa State, prompting it to declare a force majeure on exports from its Brass River terminal. The company was said to have shut in production of around 33,000 barrels of oil and two million cubic metres of gas per day following the Bayelsa attack.
Shell's oil pipelines in River State as well as a shallow-water offshore field were sabotaged by the militants last Sunday.
MEND said the attack on the company's pipelines at Adamakiri and Kula, both in Rivers State , early on Sunday was part of its operation "Hurricane Piper Alpha".
Before last Sunday's incident, the group had attacked Shell's Trans Ramos pipeline at Aghoro-2 community in Bayelsa State, forcing the company to halt some chunks of crude production. Nigeria's crude oil production and export have suffered a lot of set backs owing to the renewed violence in the region.
The Nigerian National Petroleum Corporation (NNPC) announced on Wednesday that crude oil supplies to Warri and Kaduna refineries have been cut off because of the attacks on the pipelines.
Falling demand for oil sent oil prices crashing from record highs above $147 a barrel last July towards $30 a barrel at the turn of the year. Since mid-April, however, prices have risen sharply on prospects for an economic recovery.
A Reuters poll of industry analysts showed oil prices are expected to average more than $70 a barrel in 2010, compared with the latest forecast average of $56.59 for this year.
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