Nigeria’s state oil company plans to renegotiate its production-sharing contracts with oil majors as Africa’s top crude producer tries to push ahead with a clean-up of the sector that is the lifeblood of its economy.
“We intend to begin the process of the renegotiation of the PSCs to see what value chain and improvements we can have from these contracts,” said Ibe Kachikwu, the new head of the Nigerian National Petroleum Corporation.
The NNPC said it would overhaul its contracts with companies such as Shell, Chevron, Eni and ExxonMobil “in the weeks and months ahead . . . to extract as much benefit as possible for Nigeria”, according to the emailed statement.
Nigeria, which gets 70 per cent of government revenues from oil, has been hit hard by the plunge in global oil prices and has spent billions trying to defend its currency, which the market believes needs to be devalued for the third time in less than a year.
Shortly after Mr Kachikwu was appointed by President Muhammadu Buhari last month, he announced the NNPC would be reviewing all its contracts with oil companies and would be aiming to boost revenues for the government in light of the oil price crash.
Yesterday’s remarks, however, seemed to suggest he intended to push to change the terms of the production sharing agreements the government has with oil majors.
“Some of the contracts were negotiated over 20 years ago and they have since been overtaken by new realities in the industry,’’ said Mr Kachikwu, speaking on a state visit to France with Mr Buhari.
Shell and Eni declined to comment. Mr Buhari took office in late May, riding a wave of optimism after he defeated incumbent Goodluck Jonathan on a pledge to root out the rot in the Nigerian state.
NNPC is perhaps the best example of state-sponsored industrial theft of Nigeria’s vast resources and potential. In revealing the corruption scandal under the previous administration, which led to his dismissal, former central bank governor Lamido Sanusi estimated the NNPC was diverting more than $1bn a month from state coffers.
Nigeria does not have a good record for quick implementation of intended reforms. The petroleum industries bill, which was meant to govern the sector, was stuck in Nigeria’s legislature for six years and not passed under the previous administration, costing the state billions in lost investment.
It is not yet clear whether the bill draft will be scrapped and redrafted from scratch by the parliament elected in the spring. Some experts wonder if it is realistic for the government to attempt to renegotiate terms now.
“Revisiting the PSC terms has been on the government’s to-do list for years, but it will be tough in this low-price context,” said Alexandra Gillies, director of governance programmes at the Natural Resource Governance Institute in New York.
BY MAGGIE FICK
