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Western Oil Companies Reach $5bn Deal With Nigeria

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BEVERLY HILLS, November 08, (THEWILL) – Nigeria has reached an outline settlement to resolve a protracted dispute with western energy companies, under which the groups will be paid $5bn to cover exploration and production costs in Africa's biggest oil-producing nation.

According to the Financial Times, Royal Dutch Shell, ExxonMobil, Eni, Chevron and Total have signed deals relating to this settlement of costs incurred between 2010 and 2015, as they also seek to forge new financing arrangements for their joint ventures in Nigeria.

The settlement, which would be a haircut on the $6bn-plus the western companies claim they are owed by Nigeria, needs the approval of two government bodies and final sign-off from President Muhammadu Buhari.

The report indicates that Emmanuel Ibe Kachikwu, Nigeria's minister of state for petroleum resources, revealed that the settlement had been accepted by the five companies with the hope that the deal can be finalised before the end of the year as the $5bn of payments will be made in the form of barrels of new crude production over the next five years.

Western energy companies have taken the lead role in pumping crude from Nigeria, but they have done so in joint ventures with the Nigerian National Petroleum Corporation (NNPC).

Exploration and production costs are supposed to be split in the partnerships between the two sides, but western companies have accused NNPC of failing to pay its portion of the expenses, and this has prompted the groups to hold back on vital investment.

NNPC has repeatedly queried the amounts it owes the western companies, but the settlement is an attempt to draw a line under the dispute.

Aside from security concerns in the Niger delta oil hub, this has been the biggest single hindrance to exploration and production while the joint ventures between the western energy companies and NNPC are a major contributor to the country pumping more than 2m barrels a day, most of which is exported.

In the past, the western oil companies have had to claim the money they were owed for costs run-up in the partnerships from federal government accounts that were also used to fund state spending, meaning payments were often delayed in times of crisis.

Nigeria's financial obligations to the joint ventures, known as “cash calls”, have long been a problem but are now viewed by the government as a particular burden as the country's economic crisis bites.

The settlement also addresses $1bn the western companies say is due from NNPC for costs incurred this year in the joint ventures. The groups are expected to receive a one-off cash payment from the Nigerian government to cover this amount.

Story by Oputah David