Nigeria Reviews Operating Agreements with Oil Companies

Nigeria will review its Joint Operating Agreements that are currently in place with the oil majors that produce crude for the West African country. The NNPC feels that this is a much needed review. The Nigerian government, through state-run Nigerian Nataional Petroleum Corp (NNPC), holds an average 57 percent stake in six joint ventures with multinationals led by Royal Dutch/Shell.

"We are considering a review of the JOA with a view to making it relevant to the current situation," Chris Ogiemwonyi, General Manager of NNPC unit National Petroleum Investments and Management Services Ltd, told Shell contractors. "This agreement was designed for situations in the 1970s and the 1980s," he said in the address in Lagos. "It is obvious that due to changing circumstances in the country and internationally some provisions of the JOA are already outdated." Ogiemwonyi did not spell out which aspects of the accord were outdated, but the NNPC said last August such a review would include provisions for more service contracts for local firms. NNPC's Group Executive Director for Exploration and Production, Andrew Uzoigwe, said then the agreement "makes only cosmetic provisions for the growth of local content and participation of indigenous companies" in oil contracts.

Parliament is spearheading pressure for greater participation of local contractors in oil projects in Nigeria, Africa's biggest crude producer and a member of OPEC. Lawmakers were up in arms when Shell awarded a $434 million engineering contract in March 2001 to UK firm AMEC plc, which was expected to create more than 4,000 British jobs. MPs took turns to demand a cancellation and probe of the order, saying millions of unemployed Nigerians needed the jobs. Shell's award of a major engineering, procurement, installation and commissioning order valued at over $200 million to local firm DNSD Subsea Nigeria Ltd has since defused tension.

Almost all of Nigeria's nearly two million barrels per day crude oil production is through joint ventures, which are now facing a funding crisis resulting from a Supreme Court ruling in April on disbursement of oil revenues. The court ruled that the central government must stop direct deductions from federally collected revenues to fund critical state services, such as oil joint venture cash calls. With the 2002 budget passed by parliament and signed into law before the ruling, President Olusegun Obasanjo must now present a supplementary budget to parliament for approval before oil companies get cash call payments. Lawmakers estimate the process could take at least three months. NNPC's other joint venture partners are ExxonMobil, ChevronTexaco, TotalFinaElf and Agip.


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