Diezani-Alison-MaduThe negotiations between the Federal Government and each of the four major International Oil Companies (IOCs)-Shell, Chevron, Eni and Total, to renew 20-year oil blocks licenses continues to hit the rock, five years after they expired.

The oil majors have been in failed negotiations with the Nigerian government for several years to renew expired licenses on many of their onshore and shallow water blocks.

Minister of Petroleum resources, Diezani Alison-Madueke had on May 2012 pledged government’s readiness to renew the licenses in June of same year, but over one year after the stalemate continue to linger.

“In order to show our commitment to a vibrant upstream sector … we have started the renewal of leases in good faith … renewals with Chevron and Shell are expected to be concluded by June at the latest,” Alison-Madueke said at the signing of license renewal for ExxonMobil in Abuja on May 2012.

The Exxon Mobil’s renewal in February, 2012, was worth trillions of dollars, while that of Shell, Chevron, Total and Eni will also be in trillions of dollars.

“I can tell you that negotiations and meetings have been held on several occasions at several times in Abuja and elsewhere between representatives of government led by the minister of petroleum resources, Diezani Alison-madueke and the representatives of each of the IOCs namely Shell, Chevron, Eni and Total. But they have not been able to come up with a way forward.

“This situation is not good for the business of oil exploration and exploitation and it is the major reason why many are now saying that the licenses might not be renewed until after the passage of the Petroleum Industry Bill (PIB),” she noted.

Shell, the biggest operator in Nigeria, has onshore assets capable of producing one million barrels of crude per day, and is partnered in these projects by Nigeria’s state-oil firm Nigerian National Petroleum Company (NNPC), Italy’s Eni and France’s Total.

Exxon signed 20-year oil license renewals on Nigerian assets producing around 550,000 barrels per day in February.  The Nigerian government has however been reluctant to sign new deals or renew old ones until the Petroleum Industry Bill (PIB), which is likely to increase royalties and taxes, becomes law.

But the bill has been stuck in the assembly for years and has been subject to numerous delays and amendments, with no sign it could be passed soon, leaving major regulatory uncertainties.

Yet Shell recently said it would spend $3.9 billion on a gas project and a reconstruction of a better protected Trans Niger pipeline, one of the country’s most important crude oil routes, which often hit by outages caused by theft or sabotage.  That investment, according to stakeholders suggests Shell still sees value working onshore Nigeria, just as it plans to a block off its Chevron, two sources told Reuters. This, it is believed, would provide the perfect route from one of Nigeria’s largest gas fields to its LNG export terminal.


Information from Daily Independent was used in this report.