International Oil Companies (IOCs) operating in Nigeria are scrambling to renew their oil licences ahead of the passage of the Petroleum Industry Bill, (PIB) that could boost tax and royalty rates.
The Wall Street Journal reported yesterday that oil companies operating in the country's oil and gas industry are eager to get renewal discussions over and sign deals because the PIB that would change the scope of new oil-related joint ventures, increasing tax and royalty rates paid by foreign companies will soon be passed into law by the National Assembly.
The report revealed that several big players in Nigeria are expected to recommit to community-development programmes and local infrastructure projects.
Royal Dutch Shell Plc, the report said, has agreed to offer business training to former gun-toting militants in the oil-rich Niger Delta, following the Federal Government’s amnesty programme.
The Federal Government last Friday renewed three shallow water oil licences jointly operated by the Nigerian National Petroleum Corporation and ExxonMobil, granting the U.S. energy firm leases of a further 20 years with the option to renew again. The company became the first to have its licences renewed.
The Minister of State for Petroleum, Mr. Odein Ajumogobia, confirmed that the ministry has commenced negotiation with Angola Dutch Shell on five of its Oil Mining Leases, after the company’s decision to withdraw the law suit it instituted against the Federal Government last November over FG’s decision to renew the leases under new terms.
Government sources stated that the oil majors were rattled by recent Federal Government’s pronouncement that it had received an expression of interest from Chinese company to the rights to the expiring licences. The government disclosed last September that China’s state-owned Cnooc Ltd was interested in more than 20 oil blocks, including non-expiring blocks currently operated by Western companies.
The report said Shell Chief Executive, Peter Voser, met President Umaru Musa Yar'Adua last October to discuss renewal of Shell's licences.
“At the meeting, Shell officials argued they had been long-term investors in Nigeria and shouldn't be forced out of the country's oil fields now,” the report quoted an unnamed official who attended the meeting as saying.
"We talked about us building the foundation, us building the house, us living in the house and others knocking on the door," the official said, referring to the Chinese offer. The president "got it," the official said.
Contacted on the negotiation, a Shell spokeswoman told the Journal: "We expect that the formalisation of the renewal of these licences can be accommodated through continued dialogue with the federal government."
A Chevron Corp source, according to the report, confirmed that the company is discussing licence renewals with the Federal Government. "We're in contact with the Nigerian government about license issues. We're seeking clarity on this matter," the Chevron official told The Wall Street Journal.
Established players such as Shell, Exxon, Chevron and France’s Total SA have worked Nigeria’s fields for decades, through cycles of violent militancy, oil theft, corruption and frequent failure by the government to follow through on investment commitments in partnerships with the oil companies.
Despite all those headaches, oil companies are eager to stay in the region because of Nigeria's vast reserves. Amid worry over their licences in recent months, they have demonstrated fresh commitment.
Shell said earlier this month that it had taken the extraordinary step of starting a business-training and rehabilitation programme for former militants from the Delta region. Shell has yet to provide details about the programme or how much it will cost.
Last October, thousands of militants turned themselves in and handed over their weapons in exchange for amnesty. Analysts now see public efforts by companies to contribute to post-amnesty rehabilitation as a possible new focus of oil-company largesse.
"There could be some pressure outside and within the international oil companies to improve their relationship with the government. If oil companies feel that they can make a gesture to show that they can help (in the post amnesty process), there may be a payoff," the report quoted a Nigeria analyst based in London, Antony Goldman, as saying.
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