Tuesday, May 18, 2010

Nigeria: FG's Negotiation With Shell, Chevron Still Fruitless


Adeola Yusuf

Lagos — Negotiations between the Federal Government and two oil giants, Royal Dutch Shell and Chevron Corporation for a 20-year renewal of oil leases in Nigeria are yet to produce results.

A source at the Ministry of Petroleum Resources confirmed that the negotiations were still going on between the government and the duo of Shell and Chevron, "one year after the government had renewed leases for ExxonMobil and Elf Petroleum."

In May 2008, the state-run Nigerian National Petroleum Corporation (NNPC)signed an oil-financing deal worth $2 billion with Mobil Producing Nigeria, a unit of Exxon Mobil Corp. (XOM).

The same month, NNPC signed a similar deal worth $1 billion with Elf Petroleum Nigeria Limited.

Minister of Petroleum Resources, Diezani Alison-Madueke, had stated the government gives priority to transparency and due process in all it dealings.

She insisted that the 2010 Oil Licensing Rounds, which would commence very soon would be done "in strict compliance with due process and transparency."

Alison-Madueke also pledged to streamline the contracting processes and procedures in the oil industry so as to eliminate time wasting.

She said: "The cutting edge technologies that we have been exposed to here within this sector are obvious to all our operators. It is also very heartening to see many of our indigenous service companies, who as you know form the crucial underbelly that carries the industry in Nigeria."

She noted that coming on the heels of the signing of the Nigerian Content Development law and the anticipated coming of the Petroleum Industry Bill, Nigerians' participation at the OTC 2010 is pertinent and rewarding for the sector.

Former Minister of State for Petroleum Resources; Odein Ajumogobia, had penultimate month confirmed that negotiations were still going on between the government and the duo of Shell and Chevron.

Two months after Ajumogobia's statment, the source said, the negotiation has not been completed.

An official statement from the Ministry of Petroleum Resources made available to Dow Jones quoted Ajumogobia to have said that no specific authorisation is required from the Presidency before the license could be renewed.

"Chevron and Shell are still in negotiations with the Federal Government...over the renewal of their expired licenses," Ajumogobia stressed.

An industry source, however, told Daily Independent that "there could be more to the negotiation than meets the eyes.

"The minister of Petroleum Resources has the full authority under extant laws to renew leases and licenses," the statement said.

Royal Dutch Shell, it would be recalled, declared late 2009, that it has lost confidence in its operations in Nigeria, maintaining that it no longer depends on the country for growth in its oil and gas output.

Chief Executive Peter Voser of the oil giant, who stated this in comments posted on the company's website, said that "Shell staff in Nigeria are doing a great job in this very difficult environment."

This new stance of Shell is fueling insinuation of a halt to new oil investments by the oil giant in Nigeria.

Nigeria, Voser said, "is still a heartland for Shell, but we no longer depend on it for our growth aspirations."

This new stance, he continued, "gives us more flexibility in deciding when and how to develop oil and gas resources in Nigeria."

Shell, which has been the dominant force in Nigeria's oil industry for decades, may be looking to dramatically reduce its presence in the country.

It is seeking buyers for 10 of its Nigerian onshore oil producing assets worth between $4 billion and $5 billion in total, people familiar with the matter told the Wall Street Journal last month. China National Petroleum Corp. has been reported as a possible buyer.

Violence, kidnapping and sabotage attacks on infrastructure in Nigeria's oil producing areas have hampered Shell's operations for years.

"Shell staff in Nigeria are doing a great job in this very difficult environment," Voser said. "During 2009 sabotage and attacks on installations of the Shell Petroleum Development Corporation of Nigeria have again reduced production levels," and delayed a scheme to reduce gas flaring, he said.

Voser said in October that Shell's Nigerian oil output was down to 120,000 barrels per day from 300,000 barrels per day before the violence started.

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