Shell Venture to Invest $1.5 Billion in New Nigeria Pipeline

 By JAMES HERRON And SARAH KENT

LONDON—A joint venture led by Royal Dutch Shell RDSB.LN -0.12% PLC said Friday it will invest $1.5 billion on a new pipeline in Nigeria in a bid to reduce oil theft that has caused serious environmental damage in the country and disrupted crude production.
The new pipeline, called the Trans Niger Pipeline Loop-line, should help reduce oil spills in the Niger Delta because it will "bypass a whole area where there has been a significant quantity of oil theft," in the Ogoniland region of Nigeria, said a Shell spokesman.
Oil theft, usually involving people siphoning oil out of pipelines through improvised connections, routinely disrupts the output of Africa's largest oil producer and spills oil into the environment. This pollution has prompted harsh criticism by environmental activists of companies operating in the Niger Delta, particularly Shell.
Shell has said thieves steal an estimated 60,000 barrels a day from its Nigerian joint venture, Shell Petroleum Development Co., or SPDC. Earlier this week, the venture was forced to shut the 150,000 barrel-a-day Trans Niger Pipeline following an explosion and fire at a point that had been targeted by oil thieves in the swampy area of Bodo West in Ogoniland.
SPDC is a joint venture between Shell, state-owned Nigeria National Petroleum Corp. and the local units of France's Total SA FP.FR -1.06% and Italy's Eni ENI.MI -0.64% SpA.
The new pipeline is a loop off the existing Trans Niger Pipeline that will pass through a swampier area, where more of the pipeline will be submerged, the Shell spokesman said. This location will make oil theft more difficult and the pipeline will also be protected by stronger intruder-detection technology, he said.
The success of the new pipeline could very much depend on the technical measures Shell puts in place to make it a more difficult target for theft, said Thomas Horn Hansen, an analyst at consultancy Risk Intelligence. While shifting the location of the pipeline could reduce theft in the short term, organized crime of the type that operates in the Delta might not be deterred in the long term, he said.
In 2010, SPDC invested $1.1 billion to replace its Nembe Creek pipeline, but leaks and fires related to crude-oil theft still forced the company to close the pipeline several times between December 2011 and May 2012. SPDC shut the pipeline in April to remove connections used to siphon off oil after incidences of theft rose to "unprecedented levels."
SPDC is also planning on investing $2.4 billion in five new Nigerian gas projects, collectively called Gbaran-Ubie Phase Two.
Shell said that, independent of its partners in SPDC, it will conduct a strategic review of its interests in Nigeria, which could result in an exit from some onshore oil and gas leases in the eastern part of the Niger Delta. Need money? Click here for revolutionary ways to make it online.