US embassy cable - 03LAGOS731

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