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Bloomberg: Nigeria to Favor Smaller Companies Over Exxon, Shell (Update3)

By Carli Lourens and Julie Ziegler

Nov. 1 (Bloomberg) — Nigeria is “tired” of dealing with oil companies such as Exxon Mobil Corp. and Royal Dutch Shell Plc and is inviting smaller producers to bid for rights to explore and operate in the country.

“We’re looking for new players — we’re getting tired of the big Exxons and Shells,” Tony Chukwueke, head of the country’s Petroleum Resources Department, said today in a speech in Cape Town, South Africa. “We’re looking for small” companies.

Nigeria has been courting producers such as Addax Petroleum Corp. and state oil operators as larger multinationals claim recent license offerings have had unfavorable terms. Shell is the country’s biggest producer, accounting for about half of Nigeria’s average daily output, and Exxon is the second-largest operator in an industry that contributes to 40 percent of Nigeria’s gross domestic product.

Chukwueke said oil producers shouldn’t seek to sidestep national policy by tying up with smaller companies. “If you want to come to Nigeria, don’t come through partners,” he said.

Henry Hubble, a spokesman for Irving, Texas-Exxon Mobil, said the company hadn’t been contacted by Nigerian officials about the change in policy. Africa is the biggest source of crude for Exxon Mobil, the world’s largest oil company. Precious Okolobo, a spokesman for Shell, based in The Hague, didn’t immediately respond to calls seeking comment.

Active Role

Nigeria also will strengthen the role of state-run oil company Nigerian National Petroleum Corp. in the operations of large foreign producers including Shell, Chukwueke said.

“NNPC will no longer be an onlooker, it will become more of an operator,” he said, without elaborating.

Nigeria is in the process of re-examining its agreements with foreign oil companies as part of a broader overhaul of its energy industry, said Rilwanu Lukman, a former Nigerian oil minister who now chairs a committee overseeing that work.

“It’s going to take some time; it is a dialogue,” Lukman said in an interview in London yesterday. “It’s not just about production-sharing contracts, it’s about the whole industry.”

The world’s biggest international oil companies, or IOCs, have generally failed to replace their own oil and gas reserves in recent years, said Fatih Birol, chief economist at the International Energy Agency. Those companies may well become “niche players” if they continue to lose ground to growing national oil companies.

Security Issue

Chukwueke denied accusations that security for oil companies is worsening in the country, saying problems are “abating” in the Niger Delta where militants have attacked oil installations and kidnapped foreign workers.

“Hostage taking will be something of the past,” he said. “The issues with the Delta are heavily linked with politics, and politics are stabilizing.”

The Movement for the Emancipation of the Niger Delta, or MEND, said on Sept. 23 that it was resuming attacks and kidnappings after the arrest of one of its leaders. The militant group has kidnapped and released thirteen expatriate oil workers hostages in two separate attacks over the past two weeks. MEND started waging its campaign at the beginning of 2006.

“Governments have to own the security in the countries we operate” in, Ann Pickard, Shell’s executive vice president for exploration and production in Africa, said in a speech at the same conference yesterday. Crude-oil theft, a “big problem in Nigeria,” is “on the rise again,” she said.

To contact the reporters on this story: Carli Lourens in Johannesburg at [email protected] ; Julie Ziegler in Lagos at [email protected] .

Last Updated: November 1, 2007 13:45 EDT

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