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Cablegate: Tfiz01: Back in Business - Chevron Nigeria

This record is a partial extract of the original cable. The full text of the original cable is not available.

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

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