Pipe Explosion Causes Shell Facility Shut-Downs in Nigeria

An oil pipeline blazes near the Nigerian city of Lagos (image: AFP)

A major crude pipeline connecting Nigerian Shell Oil facilities to the southern export terminal in Escravos exploded over the weekend, causing a shut-down in production at several Shell facilities.  The explosion is believed to be caused by sabotage, the VOA news service reports.

Shell’s oil infrastructure in Nigeria has been the target of numerous attacks by Movement for the Emancipation of the Niger Delta (MEND) and other rebel and organized crime groups.  The explosion reduced Shell’s output in Nigeria for an indefinite period, contributing to rising oil prices on the markets today.  According to the AFP news service, attacks by rebel and criminal groups have caused a 600,000 barrel-per-day decrease in Nigeria’s oil output since 2006.

While there have been some periods of relative calm since the attacks began, the overall situation in Nigeria has been steadily getting worse over the last two years.  Oil workers and managers blame the Nigerian government and army for their insufficient security efforts.  Meanwhile local residents, many of whom support rebel groups, say the government gives them no choice but to seek ransoms and steal oil from international oil operations by keeping them in poverty.

The effects of incidents such as last weekend’s pipe explosion on the oil markets tend to be mild, as Nigeria is the world’s eighth largest oil exporter.  However, the psychological effects of such events tend to reduce confidence in the future of Nigeria’s oil industry, which sometimes contributes to rising oil prices, as was the case today.

Whether a truce is arranged between the government and rebel groups or the Nigerian military doubles its efforts to tamp down rebel activities, something must be done if Nigerian oil output is to sustain itself and begin to expand, as booming future demand will no doubt require.