Thursday, May 6, 2010

Yar'Adua's oil reforms run into troubled waters

The death of Nigeria's president Umaru Yar'Adua jeopardises long-awaited reforms of the nation's decrepit and corruption-ridden oil sector, analysts say.

Yar'Adua, who died late on Wednesday after a protracted illness, had been keen to turn around the fortunes of the 50-year-old industry with a swift passage of the Petroleum Industry Bill (PIB).

In 2009 he presented Parliament with the draft law proposing sweeping changes to the way Africa's top crude exporter ran its affairs, in a bid to turn the country's cash-earner into a world class performer.

Nigeria's oil sector is notorious for being "grossly inefficient and corrupt", Lagos economist Dimeji Odumesi said.

"Yar'Adua really wanted to change the situation but his illness and slow passage of the enabling law is killing that dream," he said.

Under the proposed law, state oil firm Nigerian National Petroleum Corporation (NNPC) was to run as a profitable commercial entity, competing with multinationals such as Royal Dutch Shell and ExxonMobil.

A year on however, the proposed law was still the subject of intense debate following fierce opposition to some of its clauses from the oil giants.

NNPC new boss Shehu Ladan described the Bill as the "most comprehensively reviewed" in Nigeria’s legislative history.

Although Yar'Adua's successor, Goodluck Jonathan last month appointed new ministers to handle the country's petroleum resources and the oil region of the Niger Delta and a head at the state oil firm.


But some analysts doubt oil reforms are his immediate concern.

"Jonathan has just one year to go to the end of Yar'Adua's tenure," said Odumesi.

His main preoccupation now is to have a firm grip on power rather than implement long-term reforms of the energy sector."

But for Jonas Horner of the New York-based think tank Eurasia group, the new president had consolidated his control of the industry by shaking up the state oil top management.

"Jonathan will now push for oil sector reform through passage of the petroleum industry Bill ... and by reinvigorating the amnesty process in the Niger Delta," said Horner.

International oil firms have been most opposed to the proposed oil law. The government has said it has made 56 changes concessions to meet their concerns, but there are still issues to be resolved.

"The simple, passionately stated priorities of government have been completely lost in a cumbersome document that lacks insight into the very basics of our industry," Shell's former vice-president for Africa Ann Pickard said recently.

If passed in its current form, she warned, the mistakes would take years to fix and over the next decade Nigeria could lose $50-billion in planned investment.

Local rights activists and political leaders are also unhappy.

Bariara Kpalap, spokesperson for the Movement for the Survival of Ogoni People (Mosop), lauded the proposed law.

But "it requires strong political will to see it through" and that issues of compensation to oil communities should be clear, the campaigner warned.

Solomon Banigo, special adviser to the governor of southern oil-rich Bayelsa, Jonathan's home state, said the new law should allow for "100% control of our God-given resources for it to be meaningful".

Rebel groups have since 2006 waged an armed insurgence for a greater share of the oil wealth to go to local communities.

Despite being the world's eighth largest crude exporter, Nigeria's oil sector for decades been milked by successive corrupt regimes. - AFP

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