Nigeria on hold

David Knott
London
[email protected]

Nigeria's new president, Olusegun Obasanjo, effectively put a chunk of his country's economy on hold by canceling all contracts made since Jan. 1 by his predecessor.

On May 29, Obasanjo became the first democratically elected president of Nigeria in 15 years, having vowed to clean up the country's notoriously corrupt government and industry (OGJ, Mar. 8, 1999, p. 38).

The contracts freeze is intended to reassure Nigeria's creditors, particularly the International Monetary Fund, that Obasanjo is prepared to take tough action to stop projects leaking money.

While this may reassure the money-men, foreign petroleum companies either doing or wanting to do business in Nigeria are understandably jittery.

An $8.5 billion program of field developments and gas utilization projects proposed by Royal Dutch/Shell is the biggest potential casualty (OGJ, Feb. 15, 1999, p. 32).

On May 31, a Shell official said the company's Nigerian unit is not sure whether the program will be affected: "We haven't seen the detail of the decision. We'll just have to wait and see."

Licensing uproar

One of the biggest headaches for Obasanjo was his predecessor's allocation of 11 deepwater licenses to indigenous companies in March.

Many of the small Nigerian companies awarded licenses recently have little or no experience with major developments and are reliant on outside help to explore the blocks (OGJ, Mar. 29, 1999, p. 26).

One spurned bidder, Petrogas & Energy plc, is threatening legal action against state firm Nigerian National Petroleum Corp. (NNPC), on the grounds that the licenses were awarded to companies linked to army leaders.

Petrogas's lawyer told journalists that the company applied for an oil prospecting lease in November 1996 but received no reply from the Department of Petroleum Resources (DPR).

The company then reapplied for a license in July 1997, and when no reply was forthcoming, took its complaint to NNPC Group Managing Director Dalhatu Bayero.

According to Petrogas, Bayero said, "All discretionary allocations of oil prospecting leases have been suspended until a new policy and procedure on energy, which will be based on the principal of competitive bidding, has been worked out."

Review promised

Most potentially embarrassing to Obasanjo are press reports claiming he has an interest in Zebra Oil & Gas, which was awarded Block OPL 248. He is apparently preparing to refuse the allocation.

On a broader scale, Obasanjo promised to appoint a panel to review all contracts and licenses made to both indigenous and foreign firms, in a bid to "determine their propriety and relevance."

Meanwhile, details have not yet emerged about which of the block winners failed to raise the $20 million signature bonuses and thereby forfeited their licenses. A DPR official said that not many of the licensees paid the bonus within the stipulated time, which expired on Apr. 7.

Foreign exploration and production companies, which had been eyeing technical partnerships as a way into the deepwater blocks, appear to be keeping their distance until the situation is resolved.