Royal Dutch Shell (“Shell”) has lifted the force majeure (“FM”) on the export of the Bonny Light crude oil grade (“Bonny Light Exports”) from the Bonny Terminal. According to an official statement, Shell stated that its lifting of the FM was as a result of resumed production into the Bonny terminal following the repairs of the Nembe Creek Trunk Line (“NCTL”). Shell had previously declared FM on the Bonny Light Exports following a closure of the NCTL.
An event of FM is declared pursuant to a FM clause contained in a contract. The effect of a declaration of FM is to suspend the performance of obligations for the duration of the same, usually with an option to terminate the contract if the FM period is prolonged. The events that constitute an FM will be agreed by the parties to the contract and will usually include wars, strikes or in the case of Shell and the supply of the Bonny Exports, the closure of a pipeline through which the crude is transferred.
It is based on the premise that as such events are of no fault of the parties, the parties should not be liable for a failure to perform their obligations under the contract.
The resumption of the Bonny Light Exports may be potentially opportune for Shell as it coincides with a reduction of the global oil supply which has led to an increase in prices of global crude.
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