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Shell to Restart Nigerian Oil Operations

Royal Dutch Shell, Nigeria's largest foreign oil producer, said on Thursday it was preparing to restart oil operations shut for more than a year by militant attacks in the country's Delta.

Shell declined to give a clear date and its comments came as gunmen kidnapped up to 17 foreign workers in Nigeria's oil industry, fuelling concerns of risks to supplies from Africa's top crude oil exporter.

"Efforts continue towards restoring safe operational conditions in the Niger Delta and, following an improvement in the security situation, preparations for a restart are under way," Shell said while reporting earnings.

"No firm date can be given for a return to full production, nor the rate of ramp-up to full production."

A restart would add to supply of Nigerian crude, prized by refiners as it is easy to process into transport fuels. Lower Nigerian output has boosted oil prices and prompted Shell to trim production forecasts.

Militants bombed the Forcados oil tanker loading platform in February 2006, forcing Shell to suspend output. Forcados can pump about 380,000 barrels per day. Shell also closed its 115,000 bpd EA platform nearby.

The Movement for the Emancipation of the Niger Delta, which staged the attacks, has vowed to execute any worker found on previously abandoned oil facilities in Nigeria's western delta.

But MEND's leadership fell out with the local militia around the Forcados fields last year and it is unclear whether it is still able to mount major attacks on those facilities.

Shell, whose Nigerian venture operates Forcados, has been more cautious in predicting when the fields will reopen than Nigerian energy officials.

Last month, Nigerian Energy Minister Edmund Daukoru said the Forcados fields would restart at the end of May, while Shell said it hoped to resume operations "within the next months."

PROTRACTED

Shell has said that early shipments of Forcados crude would be of oil held in storage and analysts expect the restart of output to take time.

"From discussions with the company we understand that the production restart from Nigeria's western delta will be protracted," Citigroup said in a research note.

Industry sources are expecting just four, 950,000-barrel cargoes to be exported in June, compared with 10 or more in the months before the shutdown.

Nigeria pumped 2.15 million bpd in April, according to a Reuters survey.

Oil prices in London rose towards $67 a barrel on Thursday as the kidnapping of more workers in Nigeria's oil industry renewed concern of threats to oil supplies.

This was the second major kidnapping to take place this week in Nigeria. An attack on Tuesday forced U.S. Chevron to shut down a small offshore oilfield.

MEND, which claimed responsibility for Tuesday's attack, said the kidnappings should serve as a warning to Shell over its return to oilfields previously attacked by the group.

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