TFIZ01: BACK IN BUSINESS - CHEVRON NIGERIA

UNCLAS SECTION 01 OF 02 LAGOS 000731 SIPDIS SENSITIVE BUT UNCLASSIFIED PARIS FOR OECD/IEA TASHKENT FOR BURKHALTER E.O. 12958: N/A TAGS: EPET ENRG EFIN ECON EINV PINS NI SUBJECT: TFIZ01: BACK IN BUSINESS - CHEVRON NIGERIA RESUMES LIMITED OPERATIONS IN THE DELTA REFS: A: Lagos 677 B: Lagos 707 CONTAINS SENSITIVE PROPRIETARY INFORMATION ¶1. (SBU) Summary: Contrary to recent news reports and statements by oil executives that companies are not ready to resume operations in the delta region anytime soon, Chevron confirmed today that it had been returning workers to its transfer station and tank farm at Escravos this week. As of April 4, the company resumed crude oil production, albeit on a limited scale. Full operations are not expected before the end of April, perhaps longer. There is no indication yet of when Shell will resume operations in the Nigerian swamp. End Summary. ¶2. (SBU) Chevron-Texaco spokesperson Andrew Norman told Econoff that the company has returned workers to its transfer station and tank farm at Escravos (reftel 677),and as of April 4, has resumed crude oil production from that facility. Norman said that the workers are gradually bringing production online, and the company expects to reach 310,000 barrels per day (bpd) of crude oil production by the end of April. During this time, it will assess when it may be able to return its output from the Niger River delta region to the 440,000 bpd level maintained before the outbreak of violence in the area. ¶3. (SBU) When pressed, Norman confirmed that the 130,000 bpd difference is accounted for by the fact that, for the time being, Chevron will not re-staff the wells and small production facilities the company maintains in the swamps. The Escravos terminal, located near the mouth of the Escravos River at the Gulf of Guinea, is larger, extensively developed and easier to defend. The company is comfortable that its employees will be safe there now. A statement released by the company quotes Jay Pryor, Chevron Nigeria Limited's managing director, as saying, "We have been encouraged by the recent calm in the Western Niger Delta and, after receiving a number of government assurances on security in the area, we now believe that current circumstances allow for the safe return of our workers to Escravos and for us to restart production." ¶4. (SBU) Norman also told Econoff that of the production from Escravos coming back online immediately, priority of output will go to the oil refineries in Warri and Kaduna. These refineries have essentially been closed and left without crude oil supply after Chevron stopped pumping from Escravos (ref A and B). He admits the company has been under pressure from the government to resume supply to the refineries, but insists that worker safety remains the company's chief concern. Nigeria has been suffering from a serious fuel shortage for several weeks, and closures of the refineries have exacerbated the problem (ref A and B). ¶5. (SBU) Norman would not speculate when crude exports will resume. He noted that the company was revising its March and April loading schedules when the violence broke out, and he is uncertain exactly when and what volume of lifting will recommence. He also would not comment on when Shell can be expected to restart operations, but he agreed that its situation is more difficult, having more operations scattered throughout the swamps. ¶6. (U) Comment. This development is a welcome sign for world oil production, and it also brings needed relief to President Obasanjo's reelection bid and the national elections themselves. The volatile delta situation has loomed large as the country gears up for national, state and local elections beginning April 12, and the protracted fuel crisis has begun to affect all aspects of Nigerian life and economy. The visuals of mile long gas lines and the resulting inconvenience around the country ensured that the problem was never far from everyone's mind. If peace in the Delta ensues, and if Nigeria's refineries can alleviate some of the gasoline and diesel shortage, the chances will be better for the elections to be conducted peacefully, and Obasanjo may be able to claim some credit. Nonetheless, even when Chevron reaches its new target production goal of 310,000 bpd from Escravos, Nigeria will still be losing almost a half-million bpd from the region. That translates into a significant loss of national revenue, and continued world market interest in what's happening in Nigeria. End Comment. HINSON-JONES