The Federal Government and some oil companies lost an estimated $67.92m (N24.45bn) in revenue in eight days, due to the suspension of exports of Forcados, one of the nation’s largest crude oil grades.

Shell declared force majeure on Forcados loading programme on Monday, April 6th, 2020 after the Trans Forcados Pipeline was shut down on Saturday, April 4th, 2020 by the operator.

Force majeure is a standard clause used in majority of contracts and it includes events like wars, natural disasters and other occurrences not within the control or power of the executing party, which makes it impossible to implement the contract.

Flavision learnt from sources in the industry that the oil pipeline was shut down after discovering leaks on it.

The operator of the TFP is Heritage Energy Operational Services Limited, while Shell Petroleum Development Company of Nigeria Limited is in-charge of the Forcados export terminal.

According to Reuters, the Forcados terminal, which is one of the biggest in Nigeria, was scheduled to load 283,000 barrels per day of crude for exports in April.

At an average oil price of $30 per barrel and an exchange rate of N360 to the dollar, Nigeria lost at least N24.45bn from Saturday, April 4th to Saturday, April 11th, 2020 to the shutdown.

A Shell’s spokesman, Mr. Bamidele Odugbesan, on Saturday, April 11th, confirmed to our correspondent that force majeure was declared by the company effective from last Monday.

He said,

The reason why we declared force majeure was that Heritage shut Trans Forcados Pipeline. We don’t have anything to do in terms of control over when to shut down or when to restart the pipeline.

As soon as they restart the line and production stabilises, then we will lift the force majeure.

The Trans Forcados Pipeline is the main trunk line within the Forcados Oil Pipeline System, into which multiple branches from onshore fields are fed. The pipeline system transports water, oil and associated gas from fields in the western delta to the Forcados oil terminal, which has an oil export capacity of 400,000 bpd.

Nigeria, Africa’s top oil producer, has been hit hard by price collapse triggered by the coronavirus (COVID-19) pandemic and worsened by the recent price war between Russia and Saudi Arabia.

Nigeria relies on crude oil receipts for over half of Federal Government’s revenues and virtually all its foreign exchange.

The Federal Government has already minimized its projection of 2.1 million bpd of oil production to 1.7 million bpd, with price benchmark cut down to $30 per barrel from $57 per barrel.

Justin Nwosu

Justin Nwosu is the founder and publisher of Flavision. His core interest is in writing unbiased news about Nigeria in particular and Africa in general. He’s a strong adherent of investigative journalism, with a bent on exposing corruption, abuse of power and societal ills.