Joe Brock
Lagos - Royal Dutch Shell said last year if Nigeria's oil reforms went ahead as planned the company could lose 80 percent of its offshore oilfield acreage, according to US diplomatic cables obtained by WikiLeaks.
The long-delayed Petroleum Industry Bill (PIB), which has sparked rows between Nigeria's government and international oil firms, has been subject to numerous revisions and it remains unclear when the reforms will be passed.
One of the major concerns raised by international oil companies are planned increases to government tax and acreage revisions on deep offshore projects, where Nigeria expects to see much of its production growth in the coming years.
Ann Pickard, Shell's former top executive in Nigeria, told US diplomats in 2009 that it had more exposure to the planned changes to deep offshore oil licences than any other company, according to cables published by Britain's Guardian newspaper.
“We could lose 80 percent of our acreage,” she said.
“The problem comes from the fact that the PIB will redefine how a company can hold on to its exploration and production blocks, limiting what can be kept to two kilometres around each well. Everyone offshore loses a lot.”
Shell declined to comment on the cables on Friday.
The PIB is an ambitious piece of legislation that includes plans to privatise part of the national oil company, fix the gas and power sectors and make changes to licensing laws, taxes and the distribution of oil revenue.
Uncertainty around the PIB has put investment decisions on hold, with multiple versions of the bill still being poured over by lawmakers, increasing doubts that it will be passed before elections next April.
One of the proposals in the bill is to set aside a portion of oil revenues for residents of the Niger Delta, the restive heartland of Africa's largest oil and gas industry.
Shell's Niger Delta oil production has been restricted for years due to attacks on pipelines and platforms by militants, who claim they are fighting for a greater share of Nigeria's oil wealth.
President Goodluck Jonathan brokered an amnesty last year, with militants laying down arms in return for training and stipends, resulting in more than a year without serious attacks, allowing oil companies to make repairs and ramp up output.
However, Pickard said damage to some infrastructure was so severe there was some output capacity Shell would never recover.
In October 2009, Shell had around 900 000 barrels per day (bpd) of capacity shut in, she said. While around 600,000 bpd could be recovered, the remaining 300 000 bpd were “too unreachable”.
Since Pickard's comments, Nigeria has steadily increased output but a resurgence in militant violence in the last two months has threatened to again cut production.
Security forces have been quick to react to the recent attacks as elections approach in Africa's most populous country.
Jonathan is the first president from the Niger Delta and will be keen to avoid militant violence becoming a focal point and a tool for his opponents to use against him.
Pickard in her comments in 2009 predicted that the Niger Delta would be calm after the amnesty but would become “out of hand” when the election cycle began. - Reuters