Nigerian oil industry overhaul slowing investment says Total

The head of Total’s oil production in Nigeria said Tuesday that uncertainty over the government’s plans for a major overhaul of the country’s petroleum industry has slowed investment in new projects. Guy Maurice said investors in large projects such as Total’s new Usan deepwater offshore field set to come on stream in 2012 needed assurance that the terms of contracts would not change after new industry rules take effect. “For us, the stability of the contract is very, very important,” the chief executive of Total’s upstream companies in Nigeria told journalists. “I have to recognise that the long discussions around (oil industry legislation) has created in the industry — not only Total, but in the industry at large — a feeling of uncertainty.” Maurice said the appetite for investment had decreased over the last couple of years as it was unclear how legislation currently before lawmakers would turn out and whether guarantees would be put in place for existing projects.

Nigeria, one of the world’s largest oil exporters, has been seeking to reform its petroleum industry regulations to collect more revenue from deepwater offshore projects, among other issues. Oil companies have been pushing for a guarantee that the terms of existing contracts will not change once the legislation is approved. France-based Total is among the major oil producers in Nigeria and expects to bring its new Usan field onstream in 2012 with a peak production level of 180,000 barrels of oil equivalent per day. Some eight billion dollars (six billion euros) are expected to be spent on the project, said Maurice. Asked whether the industry legislation would prevent such products in the future, Maurice said it was too early to tell since the long-discussed bill was still being worked on and its contents were unclear. Major oil companies have also warned that investment could be sharply curtailed after the bill is passed if the government seeks to take too large a chunk of revenue from projects.

Government officials argue that favourable terms were offered to oil firms when offshore production was just beginning in Nigeria to encourage development and it is now time for the country to reap greater benefits. Also on Tuesday, Total officials lauded the government’s amnesty programme for militants in the oil-producing Niger Delta, which has seen thousands of ex-fighters turn in their weapons in favour of stipends and job training. Militant activity in the Niger Delta, which included kidnappings and attacks on oil installations, lowered the country’s oil production from 2.6 million barrels a day to about one million at the peak of the unrest. Nigeria currently produces around 2.1 million barrels daily. “I think we all can agree that the amnesty strategy is the right one,” John Addeh, Total’s executive director for external affairs, said of the programme that began last year. “Nigeria’s production has risen significantly.” Some militants claimed to be fighting for a fairer distribution of oil revenues, while others were simply criminal gangs carrying out kidnappings for ransom.