Nigeria has shelved plans to overhaul its joint venture partnerships with foreign oil firms according to the latest version of its long-delayed energy reforms, one of the pillars of the original bill, sources said.
It was hoped Incorporated Joint Ventures (IJVs) would solve funding shortfalls within state-owned oil firm, NNPC, which have been one of the biggest brakes on development in Africa’s largest energy industry over the last decade.
IJVs were used by the government to promote the Petroleum Industry Bill (PIB) but foreign oil companies like Shell, Exxon Mobil and Chevron were concerned it would mean ceding operational control to NNPC.
“The IJVs are off the table for now,” one executive at a foreign oil company who asked not to be named said. Several other sources close to the passage of the bill said IJVs were not in the latest draft. Further changes are possible.
“The oil majors don’t think they would solve the funding problems and it would mean NNPC members became chairmen of the boards and they would want to manage operations that they (foreign oil majors) believe are better handled by themselves.” NNPC was not available for comment.
The PIB has been years in the making and the delays have caused uncertainty over the future framework of working in Nigeria, costing the industry billions of dollars of potential investment and the government much-needed revenues.
Foreign oil firms which originally opposed the changes, partly due to plans to raise offshore production taxes, now favour passage of the bill in some form because the uncertainty means billions of dollars of potential investment are on hold.
The latest copy of the PIB was in the process of being read in the upper house of the National Assembly when the last administration ended following April elections.
Nigeria’s Senate passed a law shortly before its term ended that could allow the incoming lawmakers to pick up where they left off. But new senators are likely to want to make amendments which could mean further delays.
This year?
Former minister of petroleum, Diezani Allison-Madueke, who is on a new cabinet list sent for Senate approval, said in a local newspaper interview this month that ongoing discussions over the bill and confusion among lawmakers had led to delays but was optimistic the PIB could pass before the end of the year.
“It seems to me that there was still a lot of ignorance and there was still a lot of aspect of the bill that even members (of the national assembly) were not very conversant with,” she said in the interview.
“Hopefully, they would finish by the fourth quarter since they are taking it from where they stopped.” IJVs were supposed to replace existing joint venture partnerships on deep offshore oil projects, which are 55 percent owned by NNPC with the remainder shared by foreign oil firms.
NNPC has not been able to meet its share of funding every year to maintain and develop current and new projects. Oil companies have said this means only high priority projects are developed while dozens more have been delayed or scrapped.
The IJVs would have created private companies able to tap international markets for funding but foreign oil companies were uncomfortable about NNPC, as the majority shareholder, being in control of operations.
The PIB also aims to provide a greater share of Nigeria’s oil wealth for the troubled Niger Delta region and unlock the country’s vast and largely untapped gas deposits.
Nigeria has the world’s eighth largest gas reserves but has failed to take advantage of assets which could end the power shortages that shackle the country’s economic progress and boost government revenues through Liquefied Natural Gas (LNG) exports.
Some foreign investment in LNG which could have gone to Nigeria has ended up in countries like Qatar and Australia, which have reaped the benefits of soaring Asian demand.
The discovery of shale gas in the United States has sapped demand from the world’s largest energy consumer and with competitors now striding ahead in LNG developments, Nigeria may have missed an opportunity to get the most from its gas.