As Africa gains prominence as a frontier energy hub, its security problems move ever closer to home. In the latest reversal to hit its Nigerian subsidiary, Royal Dutch Shell (RDSB) has declared force majeure on gas supplied to the Nigeria Liquefied Natural Gas Co and on Bonny Light crude exports. Around 150,000 barrels of oil and 500m cubic feet of gas per day have been deferred, equivalent to 6.8 per cent of Shell's average daily production rate of 3.26m barrels of oil equivalent through 2012.
Shell was forced to close the Trans Niger Pipeline in order to repair oil leaks caused by theft at the Bodo West and Oloma sites. The shutdown came less than a week after the pipeline had reopened after earlier repairs, highlighting the local security issues faced by Africa's largest oil exporter. At least the malign influence of Nigerian Islamist militant group Boko Haram has been contained in the north of the country, much to the relief of Shell, Chevron, Exxon-Mobil, Total SA and Eni SpA, all of whom are engaged in production-sharing contracts with the state-owned Nigerian National Petroleum Corp.
Shell's recent travails are echoed in analysis of Africa's burgeoning gas industry published by Ernst & Young. Along with Nigeria, companies operating on the continent are faced with major security issues in Angola, Libya and Algeria among others. In the past, we could afford to view these regional problems dispassionately, but with the decline of North Sea gas the UK's increasing reliance on international gas markets has exposed the country to a range of additional risks - a point brought home in a recent report by energy regulator Ofgem.
With gas demand in Western Europe predicted to rise by around a fifth over the next 10 years, and insufficient replacement production coming onstream from the likes of Norway and Russia, a growing supply shortfall is likely to be met by gas produced by politically unstable economies in Africa. The situation could become particularly acute if, as some market watchers predict, Qatari supplies are diverted to more lucrative markets in Asia.
