UPI Energy Watch

Shell confirms production cut in Nigeria

Following attacks by militant group the Movement for the Emancipation of the Niger Delta, Shell was forced to shut down about 130,000 barrels per day of its Nigerian production that flows through its Nembe Creek pipeline, African newspaper This Day reported.

Geopolitical tension and violence are some of the reasons given for high oil prices worldwide.

A Shell spokesman said the company has declared "force majeure" on its July deliveries. "Force majeure" means "a greater force," or some unexpected occurrence that excuses a party from its contractual obligations.

Nigeria's oil production was gradually increasing toward its quota of 2.1 million barrels per day prior to the attacks, and now MEND has promised more violence over the next month.

Supply and demand have also contributed to high oil prices, but about 20 percent of Nigeria's oil production has been closed since 2006. If the attacks stopped, Nigeria would have the capacity to churn out 3.2 million per day, This Day reported.

Because the internal security threat affects other nations, assistance has been offered by Western leaders including British Prime Minister Gordon Brown.

Mexicans turn down new oil plan

By about an 80-point margin, voters in Mexico did not pass President Felipe Calderon's proposal to give private firms more control in the state-run oil industry, the Los Angeles Times reported.

The vote was the first of three referenda planned by the Party of the Democratic Revolution. The votes are called the Citizen Consultation and are aimed at assessing the public's opinion on proposed energy legislation, though the votes will not determine the fate of the proposed laws.

Mexico is the sixth-largest oil producer in the world and pays the most taxes out of any industry in the country, the Times reported.

Government neglect is blamed for a recent decrease in production, however, and the move to give private companies more control would take some of the pressure off the government, which currently bans foreign and private investment. Industry officials have said more capital is needed, especially to invest in offshore drilling and deepwater drilling, the Times reported.

OPEC asks Indonesia to stay

After word that Indonesia was considering leaving the Organization of Petroleum Exporting Countries, OPEC President Chakib Khelil met with Indonesian President Susilo Bambang Yudhoyono, Chinese news agency Xinhua reported.

Khelil told Yudhoyono he hoped Indonesia would keep its OPEC membership, though the country does have the right to make its own decision.

"Indonesia has played a very important role in OPEC, and we expected it to continue playing that important role. The decision to remain or pull out of OPEC is a sovereign decision. It is not up to OPEC, it is up to the country," Khelil told reporters in a news conference following his meeting.

Indonesian Minister of Mines and Energy Purnomo Yusgiantoro said recent increases in population and economic activity in Indonesia have driven it to be a net oil importer instead of a producer, and as a result Indonesia was planning to leave OPEC in 2009.

Indonesia also reportedly has had to cut back its imports because of record-high prices in July.

Khelil recently said he thinks the current prices are an anomaly and oil will drop to around $70 a barrel if the crisis in Iran is resolved.

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Closing oil prices, July 29, 3 p.m., London

Brent crude oil: $125.18

West Texas Intermediate crude oil: $124.74

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(e-mail: energy@upi.com)