Nigerian leaders are promising to move ahead with planned efforts to reform the country’s oil and gas sector despite the continuing violence plaguing the petroleum-rich Niger Delta.
Speaking to petroleum investors at a conference in Lagos, Nigerian Oil Minister Rilwanu Lukman said lawmakers are “working earnestly to ensure the key aspects of the reform program” will be passed as soon as possible, Nigerian news sources report.
The change that is perhaps most coveted by officials would allow the state-run Nigerian National Petroleum Corp. to solicit private funds for investments in joint ventures with foreign energy firms, ending the longstanding policy that required the NNPC to ask the federal government directly for capital.
“The reforms will see the NNPC as a profit-driven company that can raise cash from the capital markets, thereby strengthening the corporation to become a commercially viable entity,” read an editorial Wednesday in the pages of a leading Nigerian newspaper, This Day.
Odein Ajumogobia, Nigeria’s minister of state for petroleum resources, has been an ardent advocate of reform, saying it would spur new growth in a sector beset by violence and inefficacy, which has caused production to decline by 25 percent or more from a onetime high of 2.5 million barrels per day.
“We must improve the capacity of the industry to attract investments. We believe that deregulation would provide the required stimulus to move the industry forward,” said Ajumogobia earlier this week.
The call for reform of the Nigerian oil sector comes at a time when the industry is faced with production far below the 2 million barrels per day mark, placing the industry second among African oil exporters behind Angola. With production estimated at 1.88 million bpd as recently as mid-January, oil output may have fallen even further, Nigerian energy officials said earlier this month.
Foreign oil executives at Royal Dutch Shell in Nigeria, the largest foreign petroleum operation in the country, have made similar claims regarding their fallen output since the onset of violence by militant groups such as the Movement for the Emancipation of the Niger Delta at the end of 2005.
Shell in February announced a force majeure, cutting oil exports from Nigeria because of increasing militant attacks on the country’s oil installations and pipelines, just the latest of several work stoppages that have halted tens of thousands of barrels of oil production for the company over the last 12 months.
MEND and other militant groups say they are fighting for a more equitable distribution of the country’s oil wealth. However, detractors criticize the group and others for using their professed advocacy as a cover for illegally siphoning oil from pipelines, a practice known as bunkering, and selling it on the international black market.
The ever-present violence and corruption in the delta have prompted some foreign oil operations to pull up stakes entirely and have made others question the viability of the operations there in the years to come.
Amid the violence hampering oil production, concerns reportedly are increasing among potential foreign investors regarding the sector, particularly the Nigerian government’s recent cancellation of oil prospecting licenses granted to a South Korean consortium that paid up front for the right to explore on and offshore in the delta.
Whether the reforms proposed can assuage fears felt by some in investing in the volatile sector remains to be seen.