Houston Chronicle: Nigeria is looking to rework contracts

Oil companies may have to hand over more revenue

By JULIE ZIEGLER and JIM EFSTATHIOU JR.
Bloomberg News

Royal Dutch Shell, Exxon Mobil Corp. and other foreign oil companies operating in Nigeria may soon have to give the government a greater share of revenue from deep-water oil production, Nigeria’s petroleum minister said Monday.

The companies signed production-sharing contracts during the 1990s that allowed them to operate without a joint venture with the government and to pay royalties once the cost of developing the field was fully recovered.

“We’d like to take this opportunity to look at the agreements and try to align our aspirations with the commercial objectives” of the international oil companies, H. Odein Ajumogobia, Nigeria’s petroleum minister of state, said during a conference in New York.

The government wants to amend the agreements, signed when oil was below $20 a barrel. Crude oil rose over $80 a barrel this month. Nigeria is sub-Saharan Africa’s biggest oil producer and the fifth-biggest exporter of oil to the U.S.

“There’s a fundamental change of circumstances that will influence the renewal terms,” Ajumogobia said.

Ajumogobia also said issues unrelated to oil supply are driving prices higher. “There are factors outside production that are affecting the market,” he said.

The Organization of the Petroleum Exporting Countries’ decision to increase oil production by 500,000 barrels a day effective Nov. 1, won’t need to be reviewed until December, Ajumogobia said. “It’s perhaps too close to the last decision we made to change that,” he said.

Companies favored the deep-water oil blocks to move away from the restive Niger delta where militant groups and criminals damaged pipelines and created production outages. The Movement for the Emancipation of the Niger Delta has shut in about a fifth of Nigeria’s production since attacks in February 2006. The move by the government may cast doubt on the U.S.’ plan to obtain more oil from Nigeria. Companies such as Shell, Exxon Mobil and Chevron didn’t participate in the last two auctions as the government sought more demanding terms.

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johnadonovan wrote:

Royal Dutch Shell is the oil company most associated with exploitation and pollution in the Niger Delta. In a Shell internal report Shell admitted that its activities had fuelled corruption and violence.

A leaked copy of the 112 page confidential report entitled “Peace & Security in the Niger Delta” can be read at this link:

http://www.shellnews.net/2004%20Documents/peaceandsecurity/peaceandsecurityinthenigerdeltawebpage.htm

Posted by John Donovan, co-owner of the website: http://royaldutchshellplc.com/

9/25/2007 6:16:30 AM

http://www.chron.com/disp/story.mpl/business/5161322.html

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