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Nigeria seeks control of its energy industry amid rising oil prices
For decades, Nigerian governments were content to let international oil
companies do the pumping, merely taking taxes, royalties and a cut of
profits. Now with global oil prices surging near $ 100 a barrel, Africa's
leading oil exporter wants to review agreements allowing oil companies to
recoup their costs before sharing profits from deep water exploration, and
consolidate all its joint venture oil assets into one potentially powerful
company with a global reach.
"We're looking at models like Petronas in Asia," said Tony Chukwueke, head
of Nigeria's Department of Petroleum Resources, citing Malaysia's state-run
oil company. It has oil and gas operations in more than 30 countries.
The reforms Nigeria envisions, if they succeed, may provide a model for
others in Africa, where now international oil firms are either operating
joint ventures for state oil firms or under contracts that allow them to
recoup costs before sharing profits.
"Nigeria should be in the driving seat, doing what it is asking foreign
companies to do for it," said Chukwueke, whose powerful department in the
Energy Ministry is in charge of implementing the country's oil and gas
policies.
Proponents may argue that with more control over the industry, Nigeria can
end the paradox of the energy-rich country wracked by fuel and power
shortages. But President Umaru Yar'Adua faces skepticism in Africa's most
populous country, where corruption has been identified as the single biggest
impediment to development.
More than $ 400 bn was stolen from the treasury by Nigeria's leaders between
1970 and 1999, according to the country's financial crimes agency.
Corruption helped create wide disparities in wealth and a loss of government
credibility that in turn bred social unrest and high crime rates. The World
Bank estimates that some 70% of Nigeria's 140 mm people live on less than $1
a day; in South Africa, which lacks Nigeria's oil wealth and has a more
diversified economy, it's 10.7%.
Yar'Adua has pledged to fight corruption and has repeatedly stressed the
need for reforms in the oil industry, which pumped $ 23 bn into government
coffers in 2006, according to the latest figures available from Nigeria's
central bank.
Driving the new oil policy is a group of Nigerians with international oil
industry experience. Members of the National Energy Council, which reports
directly to Yar'Adua, include: Rilwanu Lukman, a mining engineer and
long-serving secretary general of OPEC; Emmanuel Egbogah, who was technical
adviser to Petronas for 8 years; and Chukwueke, who worked for Royal Dutch
Shell for 27 years.
With reserves of 35 bn barrels, Nigeria accounts for 60 % of proven oil
reserves in the Gulf of Guinea, a region that has become of strategic
importance as global oil demand surges and consumers like the US try to
lessen their dependence on the Persian Gulf. Nigeria is one of the top five
suppliers of US oil imports and is emerging as an important liquefied
natural gas supplier for Europe and North America. Rising Asian economies
such as China and India are also looking to the region.
Six joint ventures with the Nigerian government run by Shell, ExxonMobil,
Chevron, France's Total and Italy's ENI account for more than 90 % of the
country's normal export capacity of 2.5 mm barrels daily. With the majority
stake in each of the ventures, Nigeria provided the larger share of capital
contributions -- averaging $3bn a year in the past decade -- to fund
exploration and production operations.
But strapped for cash to meet its joint venture obligations for deep water
exploration in the Gulf of Guinea in the 1990s, Nigeria entered into special
contracts that allowed the oil majors to invest their capital and recoup
their own costs before sharing profits with the government. The efforts
yielded massive finds such as Shell's Bonga field, Chevron's Agbami and
Total's Amenan -- each with the potential to yield more than 1bn barrels.
The Nigerian government has yet to see revenue from these offshore oil
fields, and wants to review the agreements. More fundamentally, perhaps,
Nigeria wants to consolidate all its joint venture oil assets under one
company, which could raise funds for oil investments from international
financial markets.
Officials say the national oil company will become a joint operator with the
international majors.
"We'll have a national oil company targeted to our needs such as bringing
oil to the refineries, gas to our power stations," Chukwueke said. Insiders
say the oil majors are likely to welcome the consolidation move. Once the
Nigerian oil company becomes a joint operator, it was expected to remove
delays in approving projects associated with the current process.
Analysts have seen many producer countries, such as Russia and Venezuela,
wrestle more money and control in a time of high prices. For some, it raises
the specter of governments simply expropriating, or nationalizing, foreign
businesses, a move that could discourage foreign investment and invite
international criticism.
"Once contracts come up for re-negotiation, they'll be rewritten to favor
the national oil companies, rather than the international oil companies,"
said Sebastian Spio-Garbrah, an Africa analyst in New York for Eurasia
Group. Only a few will go the way of expropriation, and Nigeria is not one
of them, he added.
Even government critics, such as Adetokunbo Mumuni of Nigeria's independent
Socio-Economic Rights and Accountability Project, are willing to give
Yar'Adua's administration the chance to prove itself.
"Compared to previous leaders, he has come across as sincere," said Mumuni.
Yar'Adua is the first Nigerian leader to publicly declare his assets. He has
a conciliatory style, and has engaged both insurgents and influential
leaders in the main Niger Delta oil region to end violence that threatens
the country's oil industry.
More than a decade ago, long before it joined OPEC, Angola sent officials to
Nigeria to study Nigeria's state oil company model, adopted by most OPEC
members with the oil price surge of the 1970s.Now Angola is interested in
adopting Nigeria's latest oil industry reform plan, said Chukwueke. Other
oil producers in the Gulf of Guinea such as Equatorial Guinea, Congo, Chad,
Cameroon and Sao Tome and Principe, may also take notice.
"But we just have to do it first, then our brothers in West Africa and the
Gulf of Guinea may benefit from us," Chukwueke said.
