The main players in Nigeria’s oil industry have spent at least the past 18 months vying to influence a proposed shake-up of sub-Saharan Africa’s biggest energy sector.
The draft Petroleum Industry Bill is evolving into the most comprehensive overhaul of the country’s oil sector since the first crude departed Nigeria half a century ago.
But behind the tussle over taxes and regulation is a battle that could lead to big changes in who controls the world’s 10th largest reserves. From local towns to Chinese oil groups, there are a growing number of claims to a limited resource. Three western oil companies – ExxonMobil and Chevron of the US and Europe’s Royal Dutch Shell – appear ready to pay hundreds of millions of dollars to ensure that expiring leases to some of their Nigerian blocks are renewed, though such payments are not required by law.
Some see the efforts to renew the leases as an acknowledgment that the groups’ Nigerian assets remain a critical – and lucrative – part of their global portfolios.
“I think what happened was that the oil companies blinked first,” explains one legislator familiar with the industry.
Shell and Chevron are yet to conclude their negotiations, however, and one industry insider suggests Shell might agree to relinquish some assets.
While others see the licence renewals as an indication that the groups are confident of winning significant concessions in the new legislation, what is clear is that the international oil majors have new rivals.
CNOOC, the state-owned Chinese oil group, in June offered to buy 49% stakes in 23 oil blocks – including some of those up for renewal.
Officials say a deal with CNOOC could be worth $50bn, dwarfing the $7.2bn that Sinopec, another Chinese national energy company, paid in August for Addax, an independent producer with Nigerian assets. But they add that CNOOC is unlikely to get everything it wants.
The Chinese interest strengthened the government’s hand in the lease negotiations, according to people familiar with them. But ministers have also made clear that Nigeria is not about to show the western groups the door – not least because they operate the bulk of the country’s producing fields.
Odein Ajumogobia, Minister of State for Energy, has said Nigeria might sell to the Chinese some of its own majority holdings in the joint ventures with western groups that operate onshore and shallow water fields, from which most of Nigeria’s production comes.
The government holds 60% of the joint ventures operated by Chevron and Exxon, and 55% of Shell’s joint venture. They are managed through the Nigerian National Petroleum Corporation (NNPC).
But it is not just CNOOC that is eyeing the holdings.
Under separate proposals that are designed to placate an insurgency in the oil-producing Niger Delta, 10% of the joint ventures’ profits would be diverted to the delta’s communities.
Emmanuel Egbogah, special adviser to the president on petroleum matters, says the scheme would give communities whose lands and waterways have been poisoned by crude extraction a sense of ownership. It could also potentially undercut support for militants operating in the region, whose attacks curbed oil output before a recent amnesty lured many to surrender their arms.
A further 9% of the state’s share in the joint ventures would be sold to Nigerians who wanted a chance to invest in an oil sector, whose benefits, many officials contend, are heavily weighted in foreign hands.
Increasingly confident local companies such as Oando and Afren are also scouting for acquisitions, particularly in light of provisions in the proposed reforms that foreign groups might have to relinquish some undeveloped assets.
As for the bill itself, at its center lies the restructuring of NNPC, which would be incorporated in the hope that it could tap capital markets to end cash flow problems that have stifled investment.
Repeated delays mean legislators are not expected to approve the bill until well into next year. Many of the reforms face opposition, including from NNPC itself.
“People would be queuing up to buy into NNPC,” says one industry consultant. “But no government wants to be seen to be selling the family jewels.”
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Source(s): Financial Times
