Under new leadership following the election of President Muhammadu Buhari, Nigeria’s state-owned National Petroleum Corporation has announced controversial plans to renegotiate production-sharing agreement with oil majors. Companies such as Royal Dutch Shell, Chevron, Eni and ExxonMobil could be affected in the coming weeks.
As reported by The Financial Times, western oil executives have warned Nigeria against sweeping changes to commercial contracts that could lead to the government taking a bigger share of revenues from the country’s vast deepwater fields.
Several western industry executives said they knew nothing of the details, others that they had not been contacted, and one, who declined to be named, said: “Don’t mess with the fiscal terms.”
In an interview with The Financial Times, Stephane Foucaud, analyst at First Energy Capital, said: “If the PSCs [production-sharing contracts] start changing, that might seriously make people rethink their investment exposure to Nigeria. Companies don’t like uncertainty. In the context of the majors cutting capital spending, there are many more opportunities for capital deployment.”
“With oil prices being about half what they were a year ago, there is less capital to go around. I think Nigeria is focused in the right place. Let’s make sure we have a stable environment, so when we do have a project that is competitive, those funds go to those projects,” one executive was quoted as saying by The Financial Times.
The newspaper also quoted Osagie Okunbor, chairman of Shell Nigeria, who said neither Nigeria nor the international oil groups wanted the negotiations “to have an adverse impact on investment in the country”. He added: “We’ll have to look at several clauses and then take a position.”
Shell has deferred until next year a final investment decision on its multibillion-dollar Bonga South West project in light of the oil price collapse.