MercoPress. South Atlantic News Agency

Nigerian oil debate: losses since 2006 amount to 47 billion USD says Shell

The Lagos government wants a profit-driven national oil corporation like those in Brazil, Malaysia and Saudi Arabia.

Nigeria has lost about 7 trillion naira (47 billion US dollars) as a result of the shut-in of the Shell Petroleum Development Company (SDPC) output since 2006 in the country the Lagos based Compass newspaper reported this week.

Mutiu Sunmonu, Managing Director of the Royal-Dutch oil giant in Nigeria, disclosed this in Abuja on Tuesday at the Senate hearing on the proposed Petroleum Industry Bill (PIB). Sunmonu told the Senate that SPDC onshore oil joint venture in Nigeria is producing at less than 30% of capacity due to the unrest in the Niger Delta and funding problems.

The country wants to drastically overhaul its oil sector with legislation to restructure the Nigerian National Petroleum Corporation (NNPC) into a profit-driven firm like those in Brazil, Malaysia and Saudi Arabia.

He insisted that the business regime being proposed would make “future capital investment in deepwater” projects uneconomic.

Speaking at the forum, Basil Omiyi, chairman of the Oil Producers Trade Section which represents foreign oil firms, said the industry needed more time to present economic analysis and lay out its case.

“The aggregate impact of multiple taxes, high royalties and loss of incentives under the Petroleum Industry Bill as currently proposed will have a significant negative impact,” he said.

In his own submission, Mark Ward, Managing Director of ExxonMobil in Nigeria, said the bill, in its current form, would mean all new planned (upstream) projects would be uneconomical, adding that Exxon plans to invest 60 billion dollars in Nigeria over several years.

Andrew Fawthrop from Chevron, who was also at the hearing, said deep-water oil fields, would fail under the proposed new oil industry legislation. He said the proposed new terms in the bill would give the government a bigger share of a smaller pie, adding that Chevron is investing 3 billion dollars a year in existing and new projects in Nigeria.

The proposed law aimed at sweeping reforms of Nigeria's oil sector is almost halfway through the legislative stages of approval but some of its provisions are sending jitters among giant oil operators.

The petroleum industry bill, which had gone through its second reading and debate in the Senate, is intended to overhaul the regulatory and operational systems of the industry, Nigeria's lifeline.

It plans to transform the existing joint ventures between the trans-national oil firms and the NNPC, and turn NNPC into an autonomous and internationally-profitable entity.

It also wants to improve on tax collection, decoupling oil from gas taxes as well as develop a system responsive to fluctuations in oil prices so as to capture on any windfall profits.

Teslim Folarin, the Senate committee leader, said the bill is designed to simplify the collection of oil revenue through shifting emphasis to easily collectible revenue as royalties and rents. (Xinhua)