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Big Oil sells up some stakes in Nigeria

Oct. 29, 2010 at 2:01 PM   |   Comments

PORT HARCOURT, Nigeria, Oct. 29 (UPI) -- Three oil majors have sold their stakes in Nigeria's southern oil zone to a Nigerian operator, a deal that many in the industry attribute to concerns about mounting political instability in Africa's most populous nation.

The sale, for an undisclosed sum, reflected growing unease among the foreign oil companies which have dominated Nigerian production for the last few decades that the country faces multiple crises that could plunge it into anarchy.

The state-owned Nigerian National Petroleum Corp. has been seeking to renegotiate its long-standing production-sharing contracts with the foreign companies, which include Chevron of the United States, the Anglo-Dutch Shell Co., Total of France, Eni and Agip of Italy and BP, to secure a greater share of oil revenues.

The companies have resisted this, with Chinese oil companies, awash with hard currency, bidding to take over their licenses.

But the announcement Wednesday by First Hydrocarbon Nigeria Ltd., a Nigerian consortium, that it had acquired the interests of Shell, Total and Agip in onshore block OML 26 in the delta marked the first major move by the foreign firms to dispose of their Nigerian holdings.

Industry sources said the increasingly disenchanted foreign firms fear the worst in the months ahead.

This could signal a substantial reduction in foreign investment, with oil drilling already decreasing. None of the foreign firms bothered to participate in the last oil bidding round in 2007.

The oilmen's most immediate problem is an expected resumption of an insurgency by impoverished and long-neglected tribes in the Niger Delta, Nigeria's principal oil-producing region.

The insurgents claim the central government has reneged on an amnesty introduced in 2009 that halted a five-year campaign of violence against the oil industry, Nigeria's economic mainstay.

The government announcement Thursday that a large shipment of illegal arms, hidden in 13 shipping containers, had been found at Lagos, the country's busiest port, deepened the alarm.

The arms included 107mm rockets, similar to those used by Arab militants to bombard Israel. It wasn't immediately clear whether the weapons were destined for armed groups in Nigeria or elsewhere. If they were intended for use in Nigeria, that would mark a sharp increase in insurgent firepower and a potentially deadly escalation in the campaign against the oil industry.

Before the amnesty declared by President Umaru Yar'Adua, who died in May after a lengthy illness, took effect, insurgent attacks, sabotage and kidnappings had slashed Nigeria's oil output by almost 1 million barrels a day, one-third of national production.

These attacks and large-scale oil theft cost the state an estimated $1 billion a month, according to government officials at that time.

The main insurgent group, the Movement for the Emancipation of the Niger Delta, has threatened to resume and escalate its operations against the oil companies. In a sign of MEND's growing frustration, 10 people were killed in a double car bombing Oct. 1 in the administrative capital, Abuja, as Nigeria celebrated its 50th anniversary of its independence from Britain.

On Friday, the Italian oil company Eni said one of its oil pipelines was blown up, possibly by MEND, cutting production from its field by 4,000 barrels a day.

MEND claimed responsibility for the Abuja bombings, which marked a sharp escalation in the insurgency.

But northern political opponents of President Goodluck Jonathan, a southerner who succeeded Yar'Adua, claimed he used the attacks to launch a witch hunt against his rivals in the run-up to the January election.

This exposed the political, ethnic and religious fault lines in the country as it braces for what is shaping up to be the most bitterly contested poll since the military relinquished power in 1999.

Yar'Adua's illness and death triggered a major political crisis dominated largely by deep-rooted rivalry between the political barons of the north and south to succeed Yar'Adua.

These crises have been worsened by tit-for-tat slaughters by Christians and Muslims in Nigeria's troubled central belt, largely over land disputes. Nigeria's population of 150 million is divided more or less equally between Muslims who dominate the north and Christians in the south.

Thousands of people have been killed, mostly in the north, in recent years and there's no sign of a let-up despite the large-scale deployment of the military.

© 2010 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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