Shell attacks Nigerian handling of oil industry
Nigeria risks being eclipsed as Africa’s leading oil producer and losing billions of dollars of investment, Royal Dutch Shell‘s outgoing Africa chief has said
By Tom Burgis in Abuja | Financial Times | February 23 2010
Echoing industry claims that planned legislation could hurt investment in the expanding deepwater sector, Ann Pickard delivered a critical assessment. “Nigeria’s position in global oil and gas markets cannot be taken for granted,” said Ms Pickard, whose tenure as the Anglo-Dutch group’s Africa boss ends in March.
Nigeria is the fifth biggest supplier of crude to the US and the petroleum sector provides 80 per cent of government revenue. But underinvestment and attacks by militants in the Niger Delta mean production is steadily declining. During the peak of attacks in the delta last year, output slipped from 2.2m barrels a day to 1.5m b/d.
Angola surpassed Nigeria as sub-Saharan Africa’s leading oil producer last year. Ghana expects to start pumping shortly and a new oil frontier stretching west through the Gulf of Guinea could lure investors.
Ms Pickard cited a forecast that Angola’s offshore output would be double that of Nigeria by 2020. She told a conference in Abuja, the capital, that $50bn (£32bn, €37bn) of planned investment in Nigeria’s hydrocarbons would not proceed if reforms went ahead.
The proposals include new terms for deepwater projects. Officials say present terms are too generous to oil companies and deprive Nigeria of the rewards of higher oil prices.
But Ms Pickard said the stagnation of the industry could be blamed on a “failure to recognise that we all benefit from taking a fair share of a growing industry rather than an excessive share of a declining one”.
If passed, the new terms would mean that royalties due on a big field such as Shell’s Bonga – which Ms Pickard said had contributed $5bn to government coffers – would jump from 1-2 per cent to more than 20 per cent, said a source familiar with the situation.
Shell, however, would not end its 50-year relationship with Nigeria. Total, the French oil major, also plans to invest $20bn, along with its partners in four to five years.
Andrew Fawthrop, the Nigeria head for Chevron of the US, the biggest shareholder and operator of the $9bn Agbami field that last year reached peak production of 250,000 b/d, warned the government: “We have to work closely together or billions of dollars will end up going elsewhere.”
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