Royal Dutch Shell Plc  .com Rotating Header Image Shell says Nigerian govt wants to cancel oil exploration incentives

February 06, 2008: 11:46 AM EST

LONDON, Feb. 6, 2008 (Thomson Financial delivered by Newstex) — The Nigerian government is looking at withdrawing an incentive scheme for oil exploration projects in the country, said a spokesman at the Anglo-Dutch oil group Royal Dutch Shell PLC. (NYSE:RDS A)

‘We got a letter from the government informing us of (its plan) to change the regulations,’ the spokesman told Thomson Financial News.

‘We’re still studying what it means and what its consequences are,’ he added.

The scheme rewards companies a bonus for every barrel of oil they discover. It was introduced in the late-1990s to encourage oil exploration in Nigeria at a time when oil prices in the world market were still low.

The rule change will affect Shell and all the foreign companies operating in the country, including ExxonMobil (NYSE:XOM) Corp, Total SA (NYSE:TOT) and Eni SpA. (NYSE:E)

The scrapping of the incentives come at a time when Shell is trying to resolve a thorny funding issue with the government, its partner in onshore operations in Nigeria.

The government, through state-owned Nigerian National Petroleum Corp (NNPC), is a 55 pct shareholder in Shell Petroleum Development Co (SPDC), which operates Shell’s onshore businesses in the country. Shell owns a 30 pct interest.

NNPC has been slow in giving its share of the joint venture’s funding needs. According to press reports in Nigeria, it now owes SPDC around 1 bln usd.

Shell is still talking to NNPC and other government agencies on how to resolve the issue, said the spokesman at Shell.

‘We’re actively negotiating,’ he said, declining to specify the amount of money NNPC owes to the joint venture.

He also refused to comment on speculations Shell has offered to lend NNPC the funds to cover the government’s share of the SPDC budget.

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