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Between divestment of oil assets and local content law

Already, recent report released by ExxonMobil shows that Nigeria’s oil production has remained stagnant in the last 40 years.The country’s new deepwater production has not…

Already, recent report released by ExxonMobil shows that Nigeria’s oil production has remained stagnant in the last 40 years.
The country’s new deepwater production has not buoyed its oil production during the period under review, the multinational oil company said in the report which was circulated to the media in Lagos.
More disturbing is the exodus of multinational oil companies from the shores of Nigeria in form of disposal of their oil assets.  Recently, Brazilian oil giant, Petrobas notified Nigeria to auction 8percent stake of its Agbami block an 20percent of the offshore Akpo project for N795billion
Anglo-Dutch giant, Shell started the divestment exercise in 2010 having sold its on-shore assets in the Niger Delta .Last year, Shell and partners, Total and Agip sold 45percent interest in the onshore block Oil Mining Lease(OML)40 to Elcrest Nigeria Limited
The company also sold its 30percent interest in OML 30 with share production of 11,000 barrels per day in the Niger Delta area to Shoreline Natural Resources Limited.
Two years ago, British Gas, sold  its Nigerian oil assets  and invested the returns in a productive venture believed to be producing gas.
Total, the French giant ,sold its 20 percent stake in the  Usan field  of Niger Delta area of the country. ConocoPhillips also disposed its onshore assets and leave the shores of Nigeria.
It is being speculated that more foreign oil companies would join the fray of those that have divested their assets due to the prevailing environment in the country.
Oil workers are not at ease with the development and have sternly warned new entrants into divestment and others of the possible implication of the auction of their assets to the Nigerian labour force.
They said they  have written the Minister of Petroleum Resources, Mrs Diezani Alison-Madueke, and her Labour and Productivity counterparts Elder Emeka Wogu to caution the multinational oil companies on the wave of divestment of their assets
Factors such as insecurity, competition among African countries and the harsh fiscal regime occasioned by the  Petroleum Industry Bill currently before the National Assembly may have been responsible for the exit of some of the multinational oil companies from Nigeria.
A boss of one of the multinational oil companies recently warned Nigeria of the dire consequences of stiffening investment in the oil and gas sector through the harsh fiscal regime of the Petroleum Industry Bill.
The companies are no longer involving in new ventures that would cause the award of contracts to indigenous companies, even though the Managing Director of Shell Petroleum Development Company, Mutiu Sunmonu, said his company’s divestment was to develop the nation.
There are however fears that the  Nigerian content law signed by President Goodluck Jonathan in the last three years would help grow the oil and gas industry as desired.
But the federal government has assured that all assets that have been marked for divestment would be awarded to indigenous companies in the country.
Minister of Petroleum Resources, Mrs.Diezani Alison-Madueke, said last week at the Offshore Technology Conference in United States of America, that the Federal government would soon commence bidding process for some of the abandoned assets of the companies.
Government is currently conducting a review of the assets.
She disclosed that the Department of Petroleum Resources has listed all the assets that had been neglected by the International Oil Companies, adding that they are receiving presidential attention.
She said as soon as the assets are properly compiled the bid rounds will start and the assets will be made available to local investors.
“There is no cause for alarm over the ongoing divestment of petroleum assets by multinational oil companies operating in Nigeria, since those assets are readily taken up by indigenous operators’’.
According to her, Shell divested close to five assets which were taken over by indigenous operators, stressing  that there are other assets that are being marked for farming-in by local participants because they have not received requisite attention by the international oil companies.
She announced that divestments made by Conoco Phillips, Total and ExxonMobil would end up in the possession of local oil companies.
The Minister said there the Federal government would make conscious effort to build the capacity and capability of indigenous operators in the upstream sector of the oil and gas industry.
 Will IOCs departure add value to local content?
Managing Director  of International Energy Services, Dr. Diran Fawibe told our correspondent that divestment of assets by international oil companies is not entirely bad.
According to him, the development would give indigenous oil companies in the country required leverage.
He however said the magnitude of the growth of indigenous companies would depend  largely on how well they are able to explore and exploit the fields to the advantage of Nigerians through huge investment in knowledge, research and development.
Executive Director of African Heritage Institution, Dr. Ifediora Amobi sees the exit of international oil companies as a threat to the nation’s economy.
 He said  it will lead to job losses and insecurity, as “we hope that some of the displaced workers from Shell, Total, etc., who will be absorbed by the local firms, have the same working conditions they were used to under the oil majors
An Energy expert Kingsley John told our correspondent that the exit of the international oil companies would not in any way spur growth of indigenous oil companies in the country.
He explained that the departure of the foreign oil companies from Nigeria would also means difficult time for the local ones due to inherent challenges in the industry which they couldn’t singularly withstand.
He said: “Indigenous oil companies are not venturing into other energy mix, including deep offshore due to absence of financial wherewithal. Banks are not borrowing so we still need the foreign oil companies that can pool resources together to venture into this risky business’’.
He told Weekly Trust that instead of building the so-called capacity among indigenous companies, government should strive to make the nation’s petroleum laws friendly so that investors would see reasons to stay and help develop the industry.
Former President of the National Association of Petroleum Explorationists (NAPE),Dr. Afe  Mayowa sees great revolution for indigenous oil companies in the country due to the disposal of assets of the international oil companies in Nigeria.
He told our correspondent that the divestment of assets of the multinational oil companies is a big boost to marginal field operators in the country.

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