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Africa's oil spills are far from US media glare

London, 19 May 2010

Oil gushing from an undersea well in the Gulf of Mexico has damaged BP's reputation and share price but accidents involving other companies in less scrutinized parts of the world have avoided the media glare. Investors have knocked around $30 billion off BP's value since an explosion at a drilling rig killed 11 people and began an oil spill the London-based major is struggling to plug nearly a month after the accident happened.

The U.S. media and political machine has turned its full force on BP and U.S. President Barack Obama has set up a commission into the leak which is sending an estimated 5,000 barrels per day (bpd) into Gulf of Mexico waters.

In contrast, the international media has largely ignored the latest incidents of pipeline damage in Nigeria, where the public can only guess how much oil might have been leaked. The most recent damage in Nigeria, which has not been attributed to militant attacks that have preyed on Nigerian oil infrastructure for years, forced U.S. operator ExxonMobil to relieve itself from contractual obligations by declaring force majeure on its exports of Nigerian benchmark crude.

The light sweet crude is particularly well-suited for refining into gasoline and is regularly supplied to the United States, the world's biggest oil burner. Exxon declined the opportunity to give details of the damage, clean-up or repair work.

An industry source, who declined to be named, said 100,000 bpd of oil had leaked for a week from a pipeline that has since been mended.

"If this (the BP spill) were in the Niger Delta, no one would be batting an eyelid," said Holly Pattenden, African oil analyst at consultants Business Monitor International. "They have these kinds of oil spills in Nigeria all the time."

Share Price Impact

BP's share price has fallen around 18 percent since news of the fire at the drilling station on April 20, while Exxon shares were largely unchanged after the force majeure announcement. The largest operator in Nigeria, Royal Dutch Shell has clashed with the Nigerian government for decades following numerous spills in Africa's largest energy producer.

Shell said in a statement on its website that its Nigerian joint venture cleans up oil spills as quickly as possible, no matter what their cause, but is sometimes delayed by security concerns or because some communities deny access.

The Anglo-Dutch major said the volume of oil spills in Nigeria for its joint venture was almost 14,000 tonnes last year, the equivilant of around 280 bpd, mainly because of militant attacks on facilities.

"It (the U.S.) is without doubt the worse place for BP to lose their political capital," said James Marriott, oil and gas analyst at environmental organisation Platform.

"If the U.S. administration gets aggressive against BP, then it's a problem for them offshore, onshore in terms of shale gas, for conventional gas, refining, some cross-border projects with Canada and further afield."

In the United States, BP's massive spill and the risk of an environmental catastrophe could have implications throughout the industry as it has reopened the debate about deepwater drilling. Analysts say, however, the world is hugely dependent on deepwater drilling to secure oil supplies.

The ExxonMobil force majeure relates to shallow offshore oil, but much of West Africa's crude production, like that in the U.S. Gulf of Mexico, is deepwater. Analysts say it is unrealistic to veto deepwater drilling if the world's oil needs are to be met.

"Perhaps in terms of health and safety regulation (things will change), but not in terms of drilling," said Angus McPhail of Wood Mackenzie consultants.

"It is not really feasible to stop drilling altogether as long as there is good demand for the product.... It would be total economic madness."

Ends --


By Joe Brock, Reuters - for Commodities Now