Nigeria warned over energy reform plans
BY Matthew Green
(BUSINESSDAY, NIGERIA)

Royal Dutch Shell issued a rare public warning to Nigeria on Tuesday that uncertainty over planned reforms to its oil and gas sector was deterring new investment vital to the industry’s long-term health.
Ann Pickard, head of Shell in Africa, voiced concerns expressed privately by other large oil groups at a conference with senior Nigerian officials in Abuja, the -capital.
Energy companies are particularly worried that the terms contained in a new petroleum industry bill, which lays down the legal framework for the biggest shake-up of the industry since independence, will cost them billions of dollars in future profits.
“We do see that the legislation, the bill, will have a profound impact on the way the industry functions and how the companies move forward,” Pickard told the conference. “Getting it right [is] absolutelyessential. Getting it wrong will not be acceptable for Nigeria or the [international oil -companies].”
Pickard’s warning came against a backdrop of gloom in Nigeria’s oil industry, which is reeling from the slump in prices, persistent violence in the oil-producing Niger Delta and a chronic lack of investment.
Shell relies on Nigeria as its second-largest source of oil and gas after the US but has lost much of its production to attacks by militants and oil thieves.
Umaru Yar’Adua, Nigerian president, launched the reform process after coming to power almost two years ago, in an effort to harness oil and gas revenues to power broader development.
In the short-term, western oil groups fear that Yar’Adua’s moves to review contracts covering huge offshore fields, as well as impose tighter terms for new developments, risk driving investment elsewhere.
Western groups also want the government to produce a viable gas pricing policy that would allow them to invest in Nigeria’s gas industry.
The cornerstone of the plan is to transform the underperforming Nigerian National Petroleum Corporation, the state oil company, into a national champion capable of raising international capital to boost flagging investment in exploration and production.
Executives at western groups are broadly in favour of the plan but say the financial crisis and collapse in oil prices will make the process more complicated than its drafters imagine.