Shell Starts Testing Trans-Forcados Pipeline after Repairs

The pipeline has been largely shut since it was bombed by the Niger Delta Avengers NDA, in February 2016.

The pipeline resumed exports in October 2016 after it was repaired but was shut down in November after the militants bombed the subsea facility for the second time. Before the militant attacks, the Forcados stream accounted for between 200,000 and 240,000 barrels per day.

But following the repeated attacks on the Forcados pipeline, companies that fed crude into the Forcados stream have been working around the long-term pipeline outage, exporting oil via barges at the Warri refinery, but this has been limited to roughly 20,000 bpd.

One of the companies, Seplat Petroleum Development Company Plc, said it planned to bypass the Trans-Forcados pipeline with the Amukpe-Escravos pipeline, which is scheduled for completion this year.

In the oil markets, the price of crude rose to $50 a barrel on Wednesday, following the biggest one-week drop in United States inventories so far this year, and after Iraq and Algeria joined Saudi Arabia in supporting an extension of supply cuts by the Organisation of Petroleum Exporting Countries, OPEC.

Reuters reported that concerns about rising output from the U.S., Libya and Nigeria continue to weigh on crude oil markets, even though analysts have questioned the sharp rebound, following the release of U.S. government figures.

The U.S. Energy Information Administration said U.S. crude inventories fell by 5.2 million barrels last week, more than the 1.8 million-barrel slide that was predicted.

With the drop in U.S. inventories, global benchmark Brent crude was up $1.34 at $50.07 per barrel, while US light crude oil was $1.43 higher at $47.30 a barrel.

Also supporting prices were comments from Algeria’s energy minister on Wednesday that Algeria and Iraq will favour extending global supply cuts when OPEC meets later this month.

On Monday, Saudi Arabia’s oil minister, Khalid al-Falih said he expected the output deal to be extended to the end of the year or possibly longer.

State-owned Saudi Aramco will also reduce oil supplies to Asian customers by about 7 million barrels in June, a source told Reuters, as part of the OPEC’s deal to reduce production.

Aramco had previously maintained supplies to important Asian customers.

But questions remain about the effectiveness of OPEC-led cuts, with OPEC member Libya saying production now exceeded 800,000 barrels per day for the first time since 2014 and could rise to 1.2 million bpd later this year.

Nigeria, which along with Libya is exempt from OPEC cuts, is also expected to see a jump in output soon as Shell reopens the Trans-Forcados oil export pipeline after tests.

However, the Minister of State for Petroleum, Ibe Kachikwu, said recently that Nigeria would voluntarily join the cuts if its production reached 1.8 million bpd.

Crude oil prices surged after the OPEC deal, but have come under pressure in recent weeks as U.S. production surged, undermining OPEC-led efforts to balance supply with demand.

Brent and U.S. light crude closed at their second lowest levels since November 29, 2016 the day before OPEC announced it would cut output in the first half of 2017.