Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke
By Chika Amanze-Nwachuku, with agency reports
Following concerns raised by international oil companies (IOCs)
operating offshore on the proposed fiscal regime as contained in the
Petroleum Industry Bill (PIB), the Federal Government is considering a
review of the proposed changes.
Also, French oil giant, Total, announced Monday that it had finalised
negotiations to sell a 20-per-cent stake in its Usan oil field (Oil
Mining Lease 138) to Chinese oil giant, Sinopec, for $2.5 billion.
Since the PIB was sent to the National Assembly by the executive, oil
companies have repeatedly warned that the fiscal terms could deter
investment in the industry and cost hundreds of thousands of jobs.
The new terms are part of a long-delayed legislation intended to
transform the oil sector in Africa’s largest crude producer after
decades of mismanagement and corruption.
Signs of willingness by the government to review a planned hike in royalties come at a critical moment, since the legislation is awaiting final approval from lawmakers and should be passed within “two to three months”, according to Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke.
But the legislation has still to overcome domestic political opposition
as well as lobbying from the oil industry and similar timelines have
not been met in the past.
In an interview with the London-based Financial Times, Alison-Madueke
said the new fiscal terms were “equitable”, and would only increase the
government’s total take from 7 to 8 per cent.
But she added that there was “room for compromise” on a planned hike in
royalties for production sharing contracts offshore, and that talks
with multinational companies such as Shell, Chevron, ExxonMobil, Total
and Eni were continuing.
“They still feel we are too far apart,” said Alison-Madueke. “We would
like to feel that at the end of the day we have some fairly median
point.”
Uncertainty over the PIB has caused stagnation in the oil industry,
with little spending on exploration in recent years. Production is stuck
at around 2.4 million barrels a day, barely half what was targeted a
decade ago.
If passed, the legislation will see the Nigerian National Petroleum
Corporation (NNPC) stripped of regulatory powers and split into three
companies, including a listed oil company run along commercial lines.
The downstream oil sector, which has seen billions of dollars stolen
through collusion between fuel marketers and corrupt officials will be
deregulated and liberalised.
However, the IOCs have profited in the past from opaque rules and lax
controls, and in many cases have failed to adhere to international
standards on environment protection.
But rising insecurity and oil theft in the Niger Delta have led the
multinationals to focus more on deepwater projects, which unlike onshore
joint venture operations are governed by production sharing contracts
with better terms.
Alison-Madueke said the proposed changes were still less onerous than in countries such as Angola and Indonesia.
But in a presentation to diplomats, civil society groups and government
officials in Abuja last week, oil company officials warned that if the
bill was not amended, 470,000 jobs and up to $100 billion in investment
could be lost by 2020. There would be no investment in new deepwater
projects.
Alison-Madueke disagreed with the prognosis, but said it was difficult
to say that the oil companies “are being totally alarmist”.
She said that she expected the existing foreign operators in Nigeria to
remain the government’s partners for years to come but that if they
prove reluctant to invest under the new legislation it could open the
door for Chinese and other emerging power oil companies to “roll on in”.
“We have a lot more competition in the sub-Saharan region than we had
before, when we were pretty much the sole explorer and producing nation.
“For that fact alone and also to keep the discourse going, we are still in discussion (with the oil companies,” she said.
A former Shell employee, Alison-Madueke is a controversial figure in
Nigeria. She is accused by opponents of running the oil ministry like a
personal fiefdom. But she is fierce in her own defence.
“If you are determined to move reforms, you will be seen as a
controversial figure, whether you like it or not,” she said, adding that
her decision to suspend dozens of fuel marketing companies last
November because of suspicions of fraud had led to “vilification, abuse
and threats to my life”.
Also, Total announced Monday that it had finalised talks to sell 20 per
cent in OML 138 to a wholly owned subsidiary of China Petrochemical
Corporation (Sinopec), for approximately $2.5 billion.
The oil block, which currently produces 130,000 barrels per day of oil
equivalent, contains the Usan field, which started production in
February 2012.
The French oil company, according to Reuters, in September announced
plans to sell assets valued at between $15 billion and $20 billion in
the period up to 2014 as part of a bolder approach to managing its
business, which has seen it buy and sell assets more frequently.
Total, which is also selling its French gas network business, is
ramping up spending on exploration to take advantage of the historically
high price of oil, which averaged $113.6 a barrel in the first half of
2012.
“This sale of an asset operated from a minority position will allow us
to focus our resources on the material growth opportunities in Total’s
portfolio” President Upstream at Total, Yves-Louis Darricarrère said.
NNPC is the concession holder of OML 138. Other partners include
Chevron Petroleum Nigeria Ltd. (30 per cent), Esso E&P Nigeria
(Offshore East) Ltd. (30 per cent) and Nexen Petroleum Nigeria Ltd. (20
per cent).
The Usan field is Total’s second major deepwater development in Nigeria
after Akpo. The field, located 100 kilometres south-east of Port
Harcourt in a water depth of 700-850 metres, is estimated to contain 537
million barrels of recoverable reserves via 42 wells and an extensive
subsea infrastructure.
It also has a stand-alone FPSO production with a capacity of 180, 000 barrels per day.
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