Nigeria's New Leader Woos Oil Companies

(THE WALL STREET JOURNAL via Dow Jones Newswires), Feb. 12, 2010

Nigeria's new acting president, Goodluck Jonathan, is attempting to breathe life into the nation's ailing energy sector just two days after assuming the duties of President Umaru Yar'Adua, who has been out of the country since November with health problems.

Mr. Jonathan summoned several executives from foreign oil companies on Thursday to meet with top Nigerian officials. A focal point of the talks: militants who have sabotaged pipelines, disrupting production and oil prices.

Mr. Jonathan is Nigeria's first president from an ethnic minority or the Niger Delta -- an area the size of England that is rich in oil but long plagued by poverty and violence against the energy industry.

That ethnic background could help him work with militants in consolidating the peace process, say officials and analysts.

"There's concern that the militants are getting irritated and worried," said Emmanuel Egbogah, the president's oil adviser.

Under the peace program that began last summer, the Nigerian government has essentially paid militants to lay down their arms.

However, the delta's main militant group recently called off its cease fire because of its unhappiness over how little money the government is putting into the region.

Wale Tinubu, chief executive of Oando PLC (OANDO.LA), Nigeria's biggest nonstate energy company by revenue and oil production, said he thinks Mr. Jonathan's ascent to power could spur the reconciliation process between the government and militants.

"Jonathan will make a renewed push towards peace in the Delta and I do believe that will reassure investors in the oil industry," said Mr. Tinubu, who wasn't at Thursday's government meeting.

Executives from Chevron Corp. (CVX), Exxon Mobil Corp. (XOM) and Royal Dutch Shell PLC (RDSA, RDSB), among other companies, attended the meeting with government officials, according to Mr. Egbogah, the government oil adviser.

Nigeria has long been a key crude supplier to the U.S. and Europe, but its oil-pumping capacity has flattened out over the past five years or so.

Output from new and lucrative Nigerian offshore oil projects has been offset by regular militant attacks -- and by natural decline rates -- at onshore locations.

U.K. consultants Wood Mackenzie estimate that Nigeria's actual oil production could hit three million barrels a day by 2016, from just over two million a day currently, representing a sharp revision downward from projections a few years ago.

"Nigeria's reserves are probably still there but the growth in output is a lot slower" because of lagging investment and fewer barrels being generated from aging fields, said Stewart Williams, a senior Africa energy analyst at Wood Mackenzie.

Foreign executives have been concerned not only by the militant attacks, but also by pending petroleum-industry legislation.

The legislation is likely to result in higher taxes and reduced profits for oil companies, but it has stalled as Nigeria's president was out of the country.

Mr. Yar'Adua traveled to Saudi Arabia in November for medical treatment for a heart condition and hasn't been seen in public since.

Mr. Williams of Wood Mackenzie says if long-delayed oil legislation were to be passed, and approved with Mr. Jonathan's backing, such a move could face questions.

Political opponents, for instance, may challenge its legality, since Mr. Jonathan is acting simply as interim president.

Mr. Jonathan has tried to make his presence felt quickly.

Even before taking up his new post Tuesday, Mr. Jonathan wrote a letter to the country's oil minister, asking him to halt all sales of oil blocks until the political vacuum had been addressed.

Then, hours after giving a national television address accepting his new position, Mr. Jonathan demoted the country's attorney general, Michael Aondoakaa, to minister of special duties.

Some lawmakers have questioned Mr. Jonathan's use of executive power.

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