Royal Dutch Shell Planning Cuts in Nigeria

Royal Dutch Shell is planning to cut costs by at least $100 million at its Nigerian operations over the next few years to counter rising expenditures and lost revenue as violence continues to curtail oil production. The strife in Nigeria, together with instability in other OPEC nations and burgeoning global demand, have pushed up oil prices. The flawed Nigerian elections in April were followed by a rise in kidnappings and other violent assaults on oil installations, dashing hopes that they would precipitate a cooling of tensions. In an internal communication with its 4,500 Nigerian workers, Shell said it was implementing "an austerity program for three years," which will likely entail the cutting of over 200 jobs. Since the violence in the Niger Delta began at the end of 2005, the region has lost $16 billion in oil-export revenue. Approximately 28% of Nigeria's 2.5 million barrel-per-day production capacity is idle. Shell's profit on output from the Niger Delta is $3-4 a barrel versus about $20 a barrel at its U.S. operations, according to CFO Peter Voser. Shell is planning total capex of $22-23 billion this year.

Sources: Wall Street Journal, CNN.com, Forbes
Commentary: Royal Dutch Shell Shows Record Results • Shell Posts Surprise Earnings Beat on Chemicals, Stock Market Gains • Shell: Full Output Expected from Nigeria
Stocks/ETFs to watch: Royal Dutch Shell (RDS.A). Competitors: ExxonMobil Corp. (XOM), BP plc (BP), ConocoPhillips (COP), Chevron Corp. (CVX), Total S.A. (TOT). ETFs: Ultra Oil & Gas ProShares (DIG), PowerShares FTSE RAFI Energy (PRFE), iShares MSCI United Kingdom Index (EWU)

Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.