Force Majeure

Nigeria’s exportation of crude oil has recently been experiencing severe disruption, due to force majeure declared by two of the biggest oil exploration companies in the country.

The oil companiesShell Petroleum Development Company (SPDC) and French oil major, Total, both recently declared force majeure on Nigeria’s Bonny Light and Amenam grades of crude oil.

Why the force majeure?: Shell, yesterday, said that it declared force majeure on exports of Nigeria’s Bonny Light crude on the 25th of April, following the closure of one of two export pipelines, the Nembe Creek Trunk Line (NCTL).

Reason for the closure: Nairametrics had earlier reported that the Bonny Light-exporting Nembe Creek Trunk Line (NCTL) was shutdown by the Aiteo Eastern Exploration and Production Company Limited, on the 21st of April, as a result of a fire outbreak, which led to the decrease of the daily ouput of crude oil to 150,000 barrels per day.

The Nigerian military have confirmed that six people whom they suspected might have been the ones that started the fire, were all consumed by the inferno.

Bonny light’s initial contract was 222,000 bpd: Bonny light’s initial contract was to supply about 222,000 barrels of crude oil per day in June and 184,000 bpd in May.

Bonny light has been down this road before: This is not the first time a force majeure has been declared on Bonny light. On the 14th of August 2017, the crude was also affected due to issues over a leak on the Nembe Creek Trunk pipeline.

Shutdown of oil-wells prompted the force majeure on Amenam – The shutdown of Amenam’s oil-wells, reduced its crude oil daily production of 100,000 barrels per day, and delayed loading by 25 days. This led to Total‘s declaration of force majeure on it.

What is a force majeure?: A Force Majeure which is French for “superior force” is a contract provision that allows a party to suspend or terminate the performance of its obligations when certain circumstances beyond their control arise, making performance inadvisable, commercially impracticable, illegal, or impossible.

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The provision may state that the contract is temporarily suspended, or that it is terminated if the event of force majeure continues for a prescribed period of time.

 

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