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Heat on Nigeria's petroleum industry as oil execs gather

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(Globalpost/GlobalPost)

Major oil industry executives gather in Nigeria's capital for an annual conference this week with Africa's largest crude producer under pressure over reports alleging large-scale corruption and mismanagement.

The conference kicking off Monday evening in Abuja is expected to see appearances by government ministers and top officials from oil majors Shell, Exxon, Total and Chevron, as well as Nigeria's state petroleum firm NNPC.

It comes on the heels of a report from a government-appointed panel alleging Nigeria has lost out on tens of billions of dollars in recent years through questionable practices in the industry.

Another audit released earlier this month said NNPC owes the government $8.3 billion for the period from 2009 through 2011.

Beyond that, a parliamentary committee report in 2012 said $6.8 billion in revenue was lost between 2009 and 2011 in Nigeria's fraud-ridden fuel subsidy programme.

Despite pledges from the government to clean up the oil sector, there has been little change in response to such findings. NNPC and firms including Shell, which has been the country's biggest producer, have denied any wrongdoing.

There is not likely to be much discussion of the reports at the conference itself, with topics such as Nigeria's long-stalled effort to overhaul its oil industry more likely to be in the spotlight.

"You have all the issues there," Auwal Ibrahim Musa Rafsanjani of the Civil Society Legislative Advocacy Centre, Transparency International's local partner, said of the reports on industry mismanagement.

"Solutions have been provided, but there is no political will to act on them."

The oil industry is of vital importance to Nigeria, with crude production at some 2.0 million barrels per day in January, according to the International Energy Agency.

The government derives some 80 percent of its revenue and nearly all of its export earnings from the industry, leaving the country vulnerable to potential tumbles in oil prices.

But despite the billions earned in oil revenue over the years, Nigeria remains severely underdeveloped, with daily electricity cuts, a poorly maintained road network and a long list of other infrastructure shortcomings.

Most Nigerians scrape by on less than $2 per day, while a corrupt elite siphons off public money at astonishing levels.

On top of that, the oil-producing Niger Delta region is badly polluted from decades of spills and the government has done little to address the problem.

Nigeria has however renewed its push to overhaul the oil industry, presenting a fresh 223-page bill to the legislature in July that would reshape taxes and royalties as well as restructure NNPC, among other measures.

The bill has stalled, as previous versions have, though Oil Minister Diezani Alison-Madueke has said that negotiations are ongoing with the industry.

Major oil firms have argued that the fiscal terms in the bill are too harsh and would prevent new investment, while the government says it is fair to all sides, though it is willing to work out a compromise.

Regional politics will also play a role, with northern states in Africa's most populous nation saying the bill again shortchanges them in favour of the oil-producing south when it comes to government revenue.

-- 'There's not going to be a perfect deal' --

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The clock is ticking. Years of uncertainty over the proposed overhaul have limited new investment as oil companies have been unsure of the risks they will be taking, while new production is coming on stream in other African nations.

"Something will have to pass," said Bismarck Rewane, a respected economist and head of Lagos-based Financial Derivatives advisory firm.

"There's not going to be a perfect deal, but there's going to be a deal that will have something for everybody."

Others were less optimistic. Obo Idornigie, an analyst with Wood Mackenzie, said he did not see the bill making it through parliament this year as is, though breaking it into pieces could help get something passed.

"If in its current form, we believe it's very unlikely for it to pass," he said.

But even if it passes and increases Nigeria's oil revenue intake, activists such as Rafsanjani say it would likely do little to improve transparency and leaves too much power with the president and oil minister.

Any real change in favour of average Nigerians may require pressure from the streets. Nationwide protests over an increase in fuel prices in January 2012 rocked the country and forced the government to partially backtrack.

Those feverish days have long since faded, but Rafsanjani argues that it would not take much to set off a similar movement.

"The tension is already there," he said. "It's just that it is waiting for a time to explode."

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http://www.globalpost.com/dispatch/news/afp/130216/heat-nigerias-petroleum-industry-oil-execs-gather