IJ Interview: Nigerias Oil Minister Accentuates the Positives

Gaurav Sharma 21/10/2010 Vienna (IJ Online) - In Nigeria's chaotic and literally 'crude' politics, very little is straight forward. However, the country's new Minister for Petroleum Resources Diezani Kogbeni Alison-Madueke only accentuated the positives when I met her at the sidelines of the recently concluded 157th OPEC conference and discussed some of the oil and gas infrastructure challenges and legislative changes her country faces. Market analysts believe her key challenge is to stage manage the passage of a Petroleum Industry Bill (PIB) through parliament and implement the rather colourfully named Nigerian Oil and Gas Industry Content Development Act recently signed into law by President Goodluck Jonathan. The bill(s) have come under criticism from energy companies who say their principal tenets give too much profit and control to the state. This is counterbalanced by President Jonathan's desire to hand 10 per cent of the country's petroleum wealth to communities in the oil-rich Niger delta. Oil remains the source of 78 to 82 per cent of the country's revenue contingent upon production. After Libya, Nigeria has Africa's second-biggest crude oil reserves of 37.2 billion barrels and the continent's largest gas deposits of more than 185 trillion cubic feet[1]. The proposed laws will alter the way Nigeria's oil and gas industry is regulated and funded but may alienate foreign energy companies. Shell, Chevron and ExxonMobil have all stated that the law would increase taxes and royalties to the government, making it unprofitable to invest in much needed infrastructure for Nigeria's deepwater fields. Along with Total SA and Eni SpA, Shell, ExxonMobil and Chevron run joint ventures that pump most of the country's oil. The state-owned Nigerian National Petroleum Corp (NNPC) has an average 59 per cent stake in such ventures. Surely then, energy bills which threaten to stifle infrastructure investment, should be a source of worry?

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Nigeria's petroleum minister Diezani Kogbeni Alison-Madueke (Centre), Gaurav Sharma, OPEC 157th Conference, Vienna, Oct 14th, 2010

"Not quite," she replied. "The Government of Nigeria expects the PIB to become law before the end of 2010. Both energy bills should not be seen as disruptive to either inward investment into Nigerian oil and gas infrastructure or to wider market stability." A final version of the PIB, first submitted to the Nigerian parliament in September 2008, will be voted on later this month. Furthermore, Alison-Madueke - a former Shell executive - feels oil market conditions and pricing are stable enough to encourage investment. Both bills, according to the Minister, are steps towards fairness and stability. She told me that a shortlist of companies to bid for new natural gas projects would be drawn after the PIB becomes law. In her opinion, foreign direct investment would not be threatened. Au contraire, in a bid to calm fears, earlier in the day, she reassured investors that Nigerian gas production and supply had reached an all-time-high. Domestically, she said an additional supply of 60 million cubic feet of gas per day by Pan Ocean Oil Corporation to the power generating stations of the Power Holding Company of Nigeria (PHCN), to ensure stable power supply would be made available. The move, according to the minister, was part of the implementation of the power sector programme unveiled by President Jonathan in September aimed at achieving stable power domestic power supply by 2013.

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The increase in gas supply is being facilitated as a result of the conclusion of the implementation of its reform of domestic gas pricing and re-evaluation of gas-to-power pricing, the minister is quick to point out. Nigeria has also stepped-up its efforts on the refinery infrastructure front and the Warri, Kaduna and Port Harcourt refineries were now operational, she added. Oil majors' resistance to the energy bill is hardly surprising, but if and when the PIB is passed, the task of both - its and the sister bill's implementation - is daunting. The specific details about implementation are being "worked on". The insurgency in the oil-producing Niger River delta saw the country's crude output from 2006 to 2009 plummet by nearly 30 per cent, with ancillary infrastructure, especially pipelines sabotaged and crude siphoned. The attacks have subsided since following a government amnesty last year, but the Movement for the Emancipation of the Niger Delta (MEND) remains at loggerheads with the government. Perhaps President Jonathan's great hope is that as a person who has survived a kidnapping attempt and is an Ijaw - the predominant ethnic group in the Niger Delta from which the militants have drawn much of their membership - Alison-Madueke will command more respect. The minister herself dismisses those kinds of labels and has vowed to lobby for a change in Nigeria's OPEC quota which is likely to increase the revenue stream. "The quota was set at a time militant attacks on oil production and transportation infrastructure had cut our production. Things are better now," she said. Nigeria's official OPEC quota is 1.673 million barrels per day (Bpd). However, a source close to the Nigerian delegation told me that it pumped 1.9 million Bpd in August. Bloomberg's independent research puts this at 2 million Bpd. Alison-Madueke said Nigerian independent operators must be given first consideration in the award of oil blocks, oil fields and oil lifting licenses in all projects. Nigerian citizens will be granted preference for employment and training opportunities in the domestic oil and gas industry. That need not imply that foreign technical know-how or direct investment is unwelcome. Ahead of the passage of the PIB, she assured her commitment to transparency. The law, Alison-Madueke explained, contains clauses that propose to remove all forms of confidentiality in business transactions in the industry to enhance accountability. "The Nigerian government has started a transparency drive in the petroleum industry. This will ensure that transactions are carried out in strict adherence to laid down rules and procedures that can stand public scrutiny," she added. Clearly, the government strategy is to use "fairness" as a plank to push both sets of legislations and dismiss oil majors' concerns as those being driven by profit. Yet, Nigeria

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needs international oil companies and their infrastructure as much as they need Nigeria. In a relationship with such a dynamic - it remains to be seen how Alison-Madueke builds consensus, as well as carry out the small task of lobbying OPEC for an increase in Nigeria's production quota.

This interview was first published by Infrastructure Journal on Oct 21st, 2010. An online copy may be seen here (Subscription protected pay-wall link).

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