Oil trade gives clearest sign yet Nigeria’s Forcados to return

ABUJA, Nigeria (Bloomberg) -- The oil market gave the clearest sign yet that Nigeria’s Forcados crude is about to flow again for the first time in eight months, after Royal Dutch Shell was among companies said to have purchased the grade halted by militant attacks in February.

Axion Energy Argentina, Pampa Energia, and Shell, operator of the Forcados export terminal, together bought about 1 MMbbl of the grade for delivery to refineries they run in Argentina between Nov. 20 and Nov. 25, according to a person familiar with the deal. The seller was Shell Western.

Nigeria’s oil industry has been so devastated by militant attacks this year that the country said it got an exemption when OPEC on Wednesday reached an accord to restrain crude supplies in an effort to curb a global glut. Oil shipments, the nation’s biggest export, fell to 1.38 MMbpd in August from as high as 2.1 MMbpd in January.

While the state oil company said Thursday that Forcados should restart within two weeks, Nigerian officials have made several pledges for supplies to resume that didn’t materialize in practice. The original restart was anticipated in May. That then got pushed back to June, then September.

Shell spokeswoman Sally Donaldson declined to comment on the cargo purchase. Axion and Pampa didn’t immediately return calls or emails requesting comment.

No Tankers

No tankers have loaded from the terminal so far, according to Bloomberg ship-tracking data. Eight cargoes are scheduled to load in October with a further six planned for November, according to loading programs obtained by Bloomberg. Force majeure, a measure that gives Shell the right not to meet contractual obligations, remains in effect for Forcados, Donaldson said by phone Friday.

A militant group called the Niger Delta Avengers claimed in February to have attacked the Forcados pipeline, according to the organization’s website. Shell said that an external force caused the halt, stopping short of calling it an attack.

Forcados is one of Nigeria’s largest crude grades with an average output of about 200,000 bpd last year. Its return has helped boost the country’s planned exports next month to about 1.98 MMbopd, the most since January.

While the resumption offers some hope, the revival of Nigerian supplies still depends on a fragile-looking security situation not deteriorating. That remains unlikely, Manji Cheto, senior V.P. for West Africa at Teneo Intelligence, said by phone.

“Nigeria’s rebound is unlikely to be sustained until the government sorts out structural issues in the Niger Delta region,” she said. “There is nothing on the horizon to drive down the NDA so there is no reason to believe there won’t be further attacks on pipelines in coming months.”