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Financial Times: Nigeria threatens to renegotiate ‘generous’ contracts of oil groups

By Matthew Green in Abuja
Published: October 24 2007 03:00 | Last updated: October 24 2007 03:00

Some of the world’s biggest oil multinationals – including Royal Dutch Shell, ExxonMobil and Chevron – are facing a fresh threat to their profits after Nigeria became the latest oil-rich country to say it was thinking of renegotiating their contracts.

Against a backdrop of rising oil prices, Rilwanu Lukman, chairman of the Nigerian government’s oil and gas reform committee, said yesterday in his first public comments since taking office in August that the country might have to revisit some of the “generous terms” granted to western companies.

Speaking at the Abuja headquarters of the Nigerian National Petroleum Corporation, the state oil company, Mr Lukman said Nigeria, Africa’s biggest crude exporter, needed to take a new look at agreements with international energy companies.

“We’ve enjoyed a very fruitful relationship with them over a long period of time and we want to continue to do that,” he told a news conference.

“But we have to look at what is on the ground now and see in which way, or ways, we can improve the conditions so the relationship will be even more mutually beneficial to both sides,” he said. “We may have to give more favourable conditions, we may have to reconsider some of our generous terms.”

A number of oil-producing countries have demanded that companies renegotiate agreements to pump crude that were struck long before oil prices reached the record highs above $90 a barrel hit last week.

Mr Lukman’s comments signal Nigeria’s intention to also look at a harder bargain with multinationals.

Nigeria has a host of oil producing agreements with foreign multinationals, mainly Royal Dutch Shell, ExxonMobil, Chevron, Total and Agip. Mr Lukman said that agreements due for review included joint-ventures signed between the NNPC, the state oil company, and unnamed companies.

The Nigerian government gets a share of revenues as an equity partner, plus additional tax revenues.

Mr Lukman said the government would also review production sharing agreements negotiated in the early 1990s, when prices were closer to $20 a barrel, for some of the world’s biggest offshore operations.

Under these accords, oil companies only start sharing revenues with the government after they have recouped the initial cost of their investment. The government is eager to amend the contracts to reflect today’s higher oil prices.

Copyright The Financial Times Limited 2007

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