MULTINATIONAL oil companies in Nigeria may have reached a decision to stop fresh investment in the oil and gas sector for the next five years.
The Guardian learnt that rather than embarking on new investment in oil and gas exploration and production, the companies would continue to maintain the current production facilities while waiting for the outcome of the ongoing reform of the Federal Government. The reform will affect most of the major agreements reached under the Joint Venture (JV) and Production Sharing Contracts (PSC) with the Federal Government.
Officials of the companies told The Guardian that the delay in project approval by the Nigerian National Petroleum Corporation (NNPC) in the midst of dwindling oil prices does not encourage making firm decision on new investment in the country. They said such delayed projects were always subject to cost re-evaluation.
To keep the status quo, some of the multinationals, it was learnt, gladly accepted alternate funding arrangement proposed by the NNPC, which now bestowed total funding of key projects on the oil firms.
Apart from using this period to evaluate government’s new policies and under the post-reform era, it will also afford the firms the opportunity to look at the emerging frontiers in other African countries, especially Angola and Ghana.
“I can assure you that there is serious discussion in this regard on at very top level of the industry and the outcome could be very bad for the country,” a firm executive said.
“Today, Nigeria has become Angola’s number one advocate, as we draw comparison from a nation which came to Nigeria to learn how to follow in our footsteps and become an industrial nation with focused objectives and targets.
“Angola attracts more investments, has more projects being developed and is giving investors a better environment to operate. They base this on a more stable and firm policy of local content and they work with their partners (oil companies, contractors and service providers). They do what they say and don’t waste time planning and implementing of reforms for several years.
“Nigeria has become the joke, the pompous and arrogant nation, who dictates its terms and has little to show for it. We are on the brink of further going down an unrecoverable slide that will see us lose our jobs, our status and credibility,” he said.
The multinational operators have therefore resolved to direct investments on emerging oil exploration and production to Angola, Ghana and other countries, where the economic climate is adjudged more conducive, while waiting for the Federal Government to complete its reforms.
The multinationals are particularly piqued that most of what they know of the ongoing reform agenda are from newspapers’ reports.
“It would appear our country men have a knack for picking on the right fights at the wrong moment. How can you talk about reviewing existing contracts, freely entered into by the country at a time when crude oil prices are so low and you cannot guarantee security in the Niger Delta where kidnapping and vandalism has shut in over one million barrels of oil per day?” an industry operator who pleaded anonymity said.
He said Nigeria was the seventh largest crude oil producer with volumes that could easily be replaced from other sources, noting that it would be foolhardy for the government to think the country’s output was indispensable.
The Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry, made up of multinational and indigenous oil and gas exploration and production companies, had expressed concerns over the reforms and its implications for the sanctity of existing contracts, incorporation of the joint ventures, among others.
In a recent interview she granted Shell World Nigeria, Ann Pickard, the Executive Vice President of Shell in charge of Exploration and Production, Africa, alluded to these concerns.
Also speaking during an interview session in Houston, Texas, USA, Ali Moshiri, Chevron’s Vice President (Exploration and Production in Africa and Latin America), branded the ongoing reforms in the oil sector in Nigeria as very complicated and urged the government to engage its partners in further dialogue.
He said Chevron supports the overall strategy of the reforms, adding however that the details were so complicated that a lot of dialogue was required for better understanding.
“But what the Federal Government of Nigeria is doing in a strategic sense is actually right. The issue of funding, Dr. Rilwan Lukman, (Minister of Petroleum) keeps bringing up has to be addressed. You cannot address it without going through some sort of reforms. The IJV, we have no problems with it strategically, the very concept, the details, that is where the complications come in, that is where we require dialogue,” he said.
He urged the government to take the reforms “one at a time, make sure we have it all aligned, one on one, as industry, as OPTS is doing,” adding that each company has a different objective.