Exxon signs Nigeria oil renewals

Exxon Mobil signed 20-year oil licence renewals on Nigerian assets producing around 550,000 barrels per day on Wednesday, the company’s country manager said, ending months of negotiations. As wide-ranging energy reforms have been delayed by political wrangling, Nigeria has not renewed several drilling licences that expired as far back as 2008 with foreign oil companies, including Royal Dutch Shell and Chevron.

Exxon said last year it had signed leases for these blocks in 2009, but the oil ministry said these were invalid. The U.S. firm said in May it would “vigorously protect” its rights to the licences. A resolution has now been reached.

The Nigerian government has 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.

The latest resolution with Exxon shows oil licences can be rolled over even while those uncertainties are unresolved. “We are very pleased with the outcome,” Mark Ward, Exxon’s head of Nigerian operations, said at the sidelines of an oil conference in the capital Abuja. “This has been a long journey and some would say a difficult journey to accomplish what we have done here today.” Nigerian Oil Minister Diezani Alison-Madueke said the leases were “renewed on mutually fair basis for which to work together for the next 20 years” and that “all other pending renewals will be expeditiously processed”.

Eni, Shell and Chevron all have outstanding shallow water, onshore oil licenses to renew. The Exxon blocks OML 67, 68 and 70 sit in the shallow water in the Niger Delta and are some of the biggest oil-producing assets in Africa’s largest energy industry.

Ward declined to say how much was paid for the licences, which secure production of oil that could be worth trillions of dollars over the licensing period. Exxon owns the assets jointly with Nigeria’s state-owned oil firm NNPC. NNPC Managing Director Austin Oniwon said he hoped “all renewals will be completed in the next few weeks”. But he cautioned that passage of the law could still alter the terms of the new contracts. “These renewals are per the existing laws, and when the PIB comes into operation, if there is need for adjustment it will be done in mutual discussions between the parties … when new laws come in everyone has to align with the new laws,” he said. President Goodluck Jonathan has asked the national assembly to fast-track the legislation, and the oil ministry last month set up a special committee to facilitate this. But there is still no sign of a final draft. The government hopes the bill will tackle issues including funding shortfalls at its joint ventures with foreign firms, insecurity in the Niger Delta, increasing local involvement in the industry and production of more gas for domestic power generation. Oil executives have said billions of dollars of investment are on hold until there is clarity on the new law.