Nigeria: Oil Licences - FG Opens Negotiation With IOC's
Chika Amanze-Nwachuku and Onyebuchi Ezigbo
19 January 2010
Lagos — It emerged yesterday that top executives of some International Oil Companies (IOCs) have commenced discussion with the Federal Government over the renewal of their oil block licences which have been due for renewal since November last year.
A major fall-out of the prolonged absence of President Umaru Musa Yar'Adua from the country is the stalling of negotiations on the renewal of the oil leases, which expired in 2008 after a 40-year tenure and which were then extended for one more year in view of the impeding sweeping changes in the oil sector.
THISDAY learnt that sequel to last week's ruling of an Abuja Federal High Court, which said Vice-President Goodluck Jonathan could exercise presidential powers, progress is expected to be made in the renewed negotiations.
The multinational oil companies, including Shell, Chevron and Total, were said to have commenced negotiations either for their oil licences' renewal or fresh deals entirely ahead of the passage of the Petroleum Industry Bill (PIB), which sources said would take place in the first quarter of this year.
Specifically, Shell, which sued the Federal Government over its decision to renew its leases under new terms but later withdrew the action, is said to be seeking the renewal of five of its leases - OMLs 71, 72, 74, 77 and 79.
Similarly, US oil major Chevron said to be on the verge of sealing its deal with government before the President travelled about 57 days ago, is also said to have commenced moves to conclude discussion on the renewal of its expired licences.
China energy giant, CNOOC, last September identified 23 licences in which it would like to buy stakes.
These include 16 operated by Shell, Chevron and Exxon, all which expired in November 2009.
CNOOC made a $50 billion offer to the Federal Government to acquire a 49-per-cent stake, translating to six billion barrels in oil reserves.
The Presidential Adviser on Petroleum Matters, Mr. Emmanuel Egbogah, recently confirmed that CNOOC proposed oil deal was being discussed by both countries.
Sources said the CNOOC planned investment is top on the deals that are currently being discussed with Jonathan.
However, Shell, which is one of several oil firms that operates in Nigeria through joint ventures with NNPC, has vowed to fight any possible efforts by the Nigerian government to hand control of its fields to Chinese oil companies.
The Shell/NNPC Joint Venture covers 90 oil fields, spanning 30,000 square kilometres, 72 oil-pumping stations, 10 gas plants and two major oil export terminals at Bonny and Forcados, according to a company fact-sheet.
Sunday Times of London had reported that Shell planned to sell fields valued at up to $5 billion as Nigeria prepares to impose stricter terms on foreign operators and hand greater control to Nigerian oil firms through PIB currently before the National Assembly. Potential buyers, the report said, might include China's Sinopec and Nigeria's Oando Plc.
But the Minister of Petroleum, Dr. Rilwanu Lukman, was quoted recently as saying that the Royal Dutch Company had no powers to sell assets it owns jointly with the NNPC. He said the company would need government approval to sell oilfields.
The Federal Government, through the Ministry of Petroleum Resources on November 20 renewed three shallow water oil licences jointly operated by the NNPC and Mobil, granting the US oil giant, leases for a further 20 years with the option to renew again.
The three blocks estimated to have a combined output of 580,000 barrels per day of crude are OMLs 67, 68 and 70.
Efforts by other IOCs to renew their own expired licences had been stalled by the President's absence.
Also, major projects that required the President's endorsement have also suffered setbacks while negotiations between the government and operators over the PIB, have been stalled, forcing oil companies to scale down investments.
Meanwhile, Lukman yesterday said the Federal Government and major stakeholders in the petroleum industry had decided to stay action on the deregulation of the petroleum downstream sector because of the "exigencies of time".
The Minister had last week broken the ice on the web of uncertainties surrounding the deregulation policy by saying that the country was not yet ready to commence full deregulation in the downstream sector.
THISDAY however gathered from industry sources that the Federal Government is "seriously worried" about the social and economic backlash that could follow the introduction of deregulation at this time, especially with the absence of Yar'Adua from the country.
Lukman, who spoke to energy reporters in Abuja shortly after flagging off a capacity training workshop jointly organised by Nigeria and the United Kingdom to improve local expertise in the oil and gas industry, said government was being mindful of its social and economic implications.
Deregulation is often understood as fuel price increase and this has often resulted in strikes and paralysis of the economy by labour unions in Nigeria.
Lukman said the implementation of the deregulation policy was being put on hold and that government was waiting for the appropriate time to kick-start it so that maximum result could be achieved with minimum social crisis.
According to Lukman, both government and all the major stakeholders are in agreement on the desirability of the policy as well as the need for appropriate time frame for implementation.
"We have gradually come to an agreement with all the major stakeholders on deregulation of the petroleum industry. It is not whether we will introduce it or if it will be implemented but that of the right time to do it," he said, adding: "The question is no longer whether we will implement deregulation but when and how it would be implemented. We are waiting for the right time to start deregulation."
He said the Federal Government was working in tandem with other stakeholders and they were fully aware of the need to wait for the time to flag it off.
Lukman said the concern of government now is how the policy could be implemented to obtain maximum returns with minimum social and economic crisis.
Added to the social concerns is the economic and social impact of deregulation which the Minister said had informed government's decision to delay the introduction of deregulation.
"We are considering the right time to kick off with the implementation. The marketers are on board and every stakeholder has come to appreciate the benefit from the policy," he said.
Ahead of the passage of the PIB by the National Assembly, the Federal Government yesterday commenced a UK-assisted capacity training programme for regulatory institutions in the oil and gas industry.
The minister, while opening the week-long training programme, said the training is focusing on capacity-building on regulation and related processes with the aim of strengthening our regulatory institutions in the oil and gas industry.
He said the holding of the workshop signified government's determination to see through the ongoing reform which would establish it as strong regulator in the industry.
"We are waiting for the Petroleum Industry Bill to be passed. The thing we can do we are already doing. Government is already doing some of the things it has done before the coming of the new law. Reform is something that is long-term in nature and needs to be implemented on a continuous basis," he said.
"We already have three regulatory agencies in place and the aim of this capacity training is to further strengthen them so that they can function more efficiently. At the core of the petroleum industry, the country is experiencing a myriad of problems regarding expertise in the control and management of the sector," he added.
The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Sanusi Barkindo, said the workshop was a product of a collaborative engagement between Nigeria and Britain meant to aid the transformation process in the oil and gas sectors.
According to the GMD, Nigeria hopes to benefit from the experience which the British oil and gas industry had undergone from a largely government-owned industry into that of a privately controlled sector.
