***Petrol thrown on Nigeria fire ***
00:11 GMT
A particularly challenging week has just ended for observers of the Nigerian petroleum industry.
Investors are watching for decisive government action to calm nerves as markets blame renewed strike threats for adding to an unprecedented spike in oil prices and as illegal oil bunkering returns in the creeks and ill-policed installations in Lagos.
Nobody is happy. On the fiscal front, Shell and other joint venture partners of the Nigerian National Petroleum Corporation (NNPC) have castigated proposals that would force them to refine 25% of their Nigerian output locally and retroactively cut cost recovery terms to 80%, while increasing petroleum profit tax in offshore production sharing contracts.
The Oil Producers Trade Section, the multinationals' lobby group which negotiates directly with the government, has cried foul, arguing that such "unfriendly" amendments would deter investment in multi-billion dollar oil projects.
If enacted, such a law could "effectively stall growth in the deep-water oil and gas industry at a critical time", according to Shell Nigeria E&P (Snepco) managing director Chima Ibeneche.
At stake is Shell's $3.5 billion Bonga field, already two years delayed and 30% over budget, and several high-cost onshore gas-to-liquids, liquefied natural gas and deep-water projects recently committed by operators.
Majors question just how Nigeria can meet its target of pumping 4 million barrels per day by 2010 if profitability is slashed and trust in the system is eroded.
Meanwhile, efforts by the Nigerian Ports Authority and Navy to tackle piracy at the country's oil hubs were in the spotlight last weekend, just as a Pentagon-sponsored seminar on energy security in the Gulf of Guinea was concluding in Abuja.
Delegates heard how the activities of ethnic militia on a looting and kidnapping spree resulted in more than 1000 deaths each year in the oilpatch.
Adding insult to injury, newly-appointed CIA chief Peter Goss declared openly to a US Senate Committee that Nigeria was in danger of becoming unstable, with companies risking the loss of concessions, refineries, flow stations, pipelines and harbour facilities in the event of a change of government or the break-up of the nation.
In response, Nigerian Navy Chief of Staff Admiral Samuel Afolayan warned that if the US did not pay up to modernise a rapid reaction fleet he would be unable to contain the gangs responsible for crude theft. The whole region could be destabilised, he cautioned.
In addition to four aged patrol boats supplied by the US Coastguard, a private sale of eight Defender-Class rapid response boats is under way. But Abuja wants more.
The US aims to increase imports from Nigeria from the current 10% to about 15% in the near future, with 25% of oil and gas imports coming from the region overall. Predictably, the African military expects Uncle Sam to foot the bill for security, and a significant US facility is already planned for Sao Tome.
"Nigeria is my biggest concern," insisted the US Defense Department's Africa boss General Carlton Fulford, who added that the recent prosecution of two admirals for involvement in illegal bunkering was "encouraging".
"But it probably goes higher than that," he said.
Against this backdrop, suitors angling for a slice of the deepwater have bemoaned the late release of guidelines for the new licensing round, including the Exclusive Economic Zone (EEZ).
Companies are worried by the impact of radical innovations in terms and conditions, and wary of the exact role to be played by local independents since the government appears undecided as to how to limit their equity stake.
Abuja is angry that attempts to swiftly conclude a licensing exercise for the remaining five blocks in the Joint Development Zone, (JDZ)managed with neighbouring Sao Tome, have been frustrated.
Despite being governed by a clear and transparent international protocol, the high-level maneuverings of Big Oil in cahoots with powerful figures in the Nigerian oil establishment have conspired to delay awards.
ExxonMobil's last-minute pitch to win a JDZ operatorship on the back of priority rights to a junior stake, despite not having bid in the round, has had negotiators scurrying back and forth this week in a bid to resolve the gridlock.
Not that there is a shortage of real estate available in the Gulf of Guinea. With Sao Tome poised to defy the World Bank and launch its own EEZ round this year, the industry is in danger of wilting from acreage overload.
And just in case minds needed focusing, both the National Union of Petroleum & Natural Gas Workers (Nupeng) and the Petroleum & Natural Gas Senior Staff Association (Pengassan) have threatened a three-day "total" warning strike from 11 April if their long-standing grievances are not addressed.
All this is what weary locals dub semi-affectionately "the Nigeria factor" a phenomenon President Olusegun Obasanjo formally declared defunct shortly after acceding to office in 1999.
However, even with all these factors coming together, it is unlikely the punters will be deterred. Nigeria has an allure all of its own based primarily on the sheer quality of its hydrocarbon potential.
AI
