Nigeria Should Sell More Equity in Oil JVs to Cos

ABUJA, Aug 02, 2005 (Dow Jones Commodities News Select via Comtex)

The Nigerian government should sell more of its equity in the oil industry to oil companies to attract additional funding, the managing director of Shell Petroleum Development Company of Nigeria, a unit of Royal Dutch Shell PLC (RDSB.LN) said Tuesday.

Shell's Basil Omiyi said the proposed reduction in government equity wouldn't affect the amount of revenue the state earns because oil production would increase.

"It's a win-win situation," Omiyi told an industry conference in Abuja. "We would be able to grow the industry in such a way that joint venture partners are able to make more money," he added.

Nigerian Finance Minister Ngozi Okonjo-Iweala said the government would consider the proposal, but added that it required "political will and support."

Currently the government holds an average of 53% equity in joint-venture projects with multinational oil companies, including Chevron Corp. (CVX), Total SA (TOT), and Agip SpA (AGI.YY), ExxonMobil Corp. (XOM).

The joint-venture operations account for more than 70% of Nigeria's total crude oil output, with Shell accounting for about half of the country's production.

Reducing the government's stake in these projects wouldn't reduce revenues because of the current royalty and tax regime, Omiyi said.

Omiyi said increased funding for the industry was necessary if Nigeria is to reach its target of achieving a reserve level of 40 billion barrels of crude and production capacity of 4 million barrels a day.

Omiyi said that these targets would imply government investment of more than $6 billion a year compared with the $4.23 billion the government allocated last year.

However, Okonjo-Iweala said the sector needed more than just extra cash, it also needed more transparency.