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Shell issues Nigeria oil warning after attack

  • Story Highlights
  • Shell says it may not be able to meet supply contracts after Nigerian attack
  • Two of Shell's oil pipelines sabotaged by rebel groups on Monday
  • Company is working to repair the lines and get production running normally
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From CNN's Christian Purefoy
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LAGOS, Nigeria (CNN) -- Royal Dutch Shell said Tuesday that it may not be able to meet its oil supply obligations in Nigeria after an attack on its major pipeline.

Heavily armed Nigerian rebels pose a constant threat to oil pipelines in the country.

Heavily armed Nigerian rebels pose a constant threat to oil pipelines in the country.

The Movement for the Emancipation of the Niger Delta (MEND), a rebel group, said "detonation engineers backed by heavily armed fighters" sabotaged two of Shell's pipelines early Monday.

After a helicopter flyover of the area, Shell confirmed that parts of its large Nembe Creek "trunk line" were damaged, company spokeswoman Caroline Wittgen said. The company shut down some production "to limit the amount of crude that will spill into the environment," she said.

Hours later, it declared "force majeure," a legal term meaning it could not meet its supply obligations in the region because of the attack.

"[Shell] is working hard to repair the line and restore production," Wittgen said.

Nigeria is the fourth-largest supplier of oil to the United States, and attacks by rebels have helped fuel the year-long spike in crude oil prices. It's one of many factors pushing up the price of gas in the U.S., where one in every 10 barrels of oil comes from Nigeria.

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MEND -- the largest rebel group -- has targeted foreign oil companies since 2006. It has bombed pipelines and kidnapped hundreds of foreign oil workers, typically releasing them unharmed, sometimes after receiving a ransom payment.

MEND hopes to secure a greater share of oil wealth for people in the delta, where more than 70 percent of the population lives on less than a dollar a day.

Its attacks on oil facilities have taken a toll.

"Anytime a pipeline is affected, anytime any production gets shut down, you see oil prices jump up one or two dollars a barrel just because there is no slack in the system," said Jim LeCamp, a senior vice president with RBC Wealth Management, which manages assets for wealthy clients worldwide.

Exxon and Shell are two of several companies that have been extracting 2 million barrels of oil a day in Nigeria. Recent rebel attacks on oil pipelines in the Niger Delta have cut overall production by roughly 10 percent -- meaning 200,000 fewer barrels of oil on some days.

That decrease in production comes at a time of increased demand from oil-hungry regions such as China, Russia and Latin America.

"Anytime there's a disruption there, it really affects the system," LeCamp said in a recent interview with CNN.

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