By Jeph Ajobaju, Chief Copy Editor
Royal Dutch Shell, ExxonMobil, Total, Eni, and other oil majors are slashing billions in spending after dips in their profits in Nigeria, and are relocating money to renewable fuels, focusing on cost-effective markets.
Nigeria attracted $3 billion or 4 per cent of the $70 billion voted for new projects in Africa between 2015 and 2019, which experts see as a warning shot to an economy that relies on oil.
The Nation reports that Nigeria’s loss is the gain of other African countries such as Angola and Sao Tome and Principe where some international oil companies (IOCs) have made major investments in recent years.
Nigeria’s loss, Sao Tome and Principe’s gain
Sao Tome and Principe is being courted by oil companies from far and near.
A consortium of US firms, including Chevron Texaco and ExxonMobil, is among the first to secure oil licence in that country along with a Norwegian company, EER, which netted over $70 million with many other prospects.
Delta State Environment Commissioner, Onogba Christian, told The Nation that oil majors like Shell and Chevron may have been compelled by Nigeria’s socioeconomic realities that make the operating environment bad for their business.
“The first ominous sign that presented itself was the deliberate efforts by the international oil companies (IOCs) to relocate their headquarters outside the Niger Delta region. When that happened a few years back, it was a bad signal.
“Of course, you cannot lay all the blame on the IOCs entirely because no businessman wants to invest in an area where insecurity is a big issue. The problem really has to do with the issue third party interference, poor legislation among other factors which are genuine reasons to affect investment decisions,” Christian said.
He urged Abuja to ensure an enabling environment for business to thrive, saying: “I’m convinced that once there is a level of assurance that their investments can be guaranteed many of these oil managers that have exited the country will come back.”
Jasper Jumbo, Chairman/CEO of Niger Delta Projects Consortium, added that “nobody wants to do business in an environment of chaos. Once peaceful co-existence is a challenge no business can survive under such a circumstance.”
International energy companies are concerned that proposals in Nigeria’s long-delayed oil industry law will deter investment in new offshore projects.
Demand for royalty relief
In a joint presentation, the Oil Producers Trade Section (OPTS) urged lawmakers to remove a proposed hydrocarbon tax as producers will still be subject to companies income tax.
“Our review of the Petroleum Industry Bill shows that deepwater provisions do not provide a favorable environment for future investments and for the launching of new projects,” Mike Sangster, managing director of Total SE’s Nigeria unit, told lawmakers at a hearing in Abuja.
To boost new investment, the proposed law should grant deepwater oil projects full royalty relief for the first five years of production or a graduated royalty scheme, argued Sangster, who chairs the OPTS which comprises 30 producers, among them Total, Royal Dutch Shell, Exxon Mobil Corp, Chevron Corp, and Eni SpA.
The bill – two decades in the making – will streamline how Nigeria’s energy assets are operated and funded.
The bill, first presented to the National Assembly in 2008, is held up by political wrangling and objections from IOCs that the government is demanding an excessive increase in revenue.
Failure to pass the bill “has been a major drag” on the oil and gas sector, Senate President Ahmad Lawan said at the public hearing on the bill in January.
The delay has harmed Nigeria’s ability to “attract both local and foreign capital” at a time of greater competition with other resource-rich nations, he stressed.
