Royal Dutch Shell Plc  .com Rotating Header Image

Nigeria’s Uncertain Peace Dividend

THE WALL STREET JOURNAL

By LIAM DENNING

Who will reap the peace dividend if the cease-fire in the Niger delta, now a week old, holds?

Surprisingly, it might not be international oil companies (IOCs) like Royal Dutch Shell that operate large fields in Nigeria. Restoring production shut-in by violence will take time and could be subject to further disruption in the run-up to 2011’s general elections.

Of more concern is what peace in the delta region means for government reform of the country’s petroleum sector. Legislation being debated aims, among other things, to raise royalties and change the structure of the joint ventures under which IOCs currently operate.

With a cease-fire under its belt — and crude nudging $80 a barrel — the government will likely redouble efforts to get the legislation passed. Speaking last week, Shell’s chief financial officer said the company and the entire industry would defend their interest.

But they are under growing pressure. By offering to allocate 10% of oil revenues to delta residents, the government may have peeled away political support the IOC’s enjoyed from some regional governors, says Eurasia Group analyst Sebastian Spio-Garbrah. Second, resource-hungry Chinese companies threaten to step in if the IOCs don’t acquiesce to new terms.

So will the government be the real winner? Perhaps, in the short term. But as recent big oil finds by the likes of Anadarko Petroleum in Ghana and Sierra Leone demonstrate, Nigeria is not the only game in town when it comes to West African oil. Tightening the screws for short-term gain could hamper long-term development of Nigeria’s resources. The real winners might be companies like Anadarko if burnt IOCs decide to move aggressively into Nigeria’s neighbors.

Write to Liam Denning at [email protected]

Printed in The Wall Street Journal, page C8

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

0 Comments on “Nigeria’s Uncertain Peace Dividend”

Leave a Comment

%d bloggers like this: