As Nigeria's new leader assesses his position, one of the biggest problems is the reluctance of foreign operators to commit to exploration and development without the government paying its share.
State firm Nigerian National Petroleum Corp. (NNPC) typically holds interests of 50% or more in a number of onshore oil production joint ventures with Royal Dutch/Shell, Mobil Corp., and Chevron Corp. The Shell venture produces about half of Nigeria's output of more than 2 million b/d.
Major-General Abdusalam Abu- bakar assumed power in Nigeria last week (OGJ, June 15, 1998, p. 28). The previous regime was unable to sanction NNPC's full contribution to exploration and production spending under these ventures. The Associated Press (AP) reported that NNPC is $800 million in arrears on its E&P programs.
A western oil industry official told AP that General Sani Abacha's regime owed $600 million to venture partners by the end of 1996 and has not paid a penny this year. Western-led ventures have proposed spending a total of $4 billion on E&D projects in 1998, but have reportedly committed only to invest $2.25 billion.
A Shell International official told OGJ that budget cutbacks in Nigeria are nothing new. Nigeria's liquefied natural gas (LNG) scheme, in which Shell is the leading partner, only got under way after foreign companies gained control of project finances, and major hold-ups over onshore E&D budgets were disclosed 2 years ago (OGJ, Apr. 22, 1996, p. 32).
Some press reports suggest Shell has recently canceled contracts to charter drilling rigs in Nigeria, but the official said that the venture canceled eight rig charter contracts as long ago as January, leaving it with two rigs to continue drilling work.
More recently, Mobil canceled a charter for a jack up rig.
The Shell official said the company is still waiting for confirmation of Nigeria's plans for oil and gas spending this year. Shell submitted a plan for its own onshore venture requiring a total $1.9 billion in capital outlays this year.
The government has so far indicated that this total must be cut back to $1.6 billion, said the official, but this figure has not yet been confirmed. With $400 million of the total earmarked for an onshore gas plant, the official said Shell envisions an operating budget of $1.2 billion on E&D projects this year.
Meanwhile, OPEC News Agency reported that Nigeria's partial payment of monthly cash call obligations this year has left it $350 million in arrears for 1998.
Opecna said one western company executive in Nigeria said that, 6 months into the year, companies are still in the dark about what they will receive from the government in 1998. Some companies had reportedly received no money at all from government this year, while others had received only partial payment.
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