Atiku Abubakar, the leading opposition challenger to Nigeria’s president, has said he would seek to overhaul oil production deals with international companies and push for energy reforms if he won next month’s presidential election.
In a warning to oil majors, Mr Abubakar said he would aim to renegotiate production-sharing contracts Nigeria has signed with big businesses such as Shell, Exxon and Chevron to develop oil blocks in Africa’s biggest crude-producing country.
“I believe we need to review it to make it . . . more fair,” he said, adding that the current terms favoured international businesses.
Mr Abubakar is locked in a tight race with President Muhammadu Buhari and is pitching himself as a pro-business candidate who will jump-start Nigeria’s economy, which has barely recovered from a recession brought on by the oil price crash.
Gail Anderson, analyst at Wood Mackenzie, said oil majors would be concerned about changes to their production deals. “Everyone knows that [terms for offshore oil] will get tougher one way or another, but the question is will the balance be right between investor and state?”
Mr Abubakar, a businessman who made his fortune in oil and gas logistics, conceded that renegotiations with oil companies could be tough. “They will try to defend [current terms] because recovery of their investment is going to be a little longer . . . but it all depends on the stability of the regulatory framework,” he said.
The opposition candidate said he wanted to prepare the ground by passing a set of oil sector reforms. They include setting up an independent regulator and breaking up the Nigerian National Petroleum Corporation, the state oil company.
Mr Abubakar said those steps would spur investment in a moribund industry. “I’m going to work with the national assembly to make sure that [the reforms are] passed because it is going to make the oil and gas sector predictable for foreign investment,” he said in an interview at a business forum in Lagos.
The regulatory overhaul — known as the Petroleum Industry Bill— has been in the works for roughly two decades and dates back to the era when Mr Abubakar served as vice-president.
He said there had not been “substantive investment” in the oil and gas sector for several years. PwC estimates that regulatory uncertainty is keeping $40bn of potential foreign investment out of Nigeria.
The only significant investment in recent years was the Egina project led by French oil major Total, which has a capacity of 200,000 barrels per day and has begun pumping its first oil.
At the business forum, Mr Abubakar called the NNPC a “mafia organisation” and reaffirmed a vow to break it up and privatise it by selling off state-owned refineries through a combination of listings, public-private partnerships and other mechanisms.
The latest attempt at passing the oil reform bill involved breaking it into four parts. The first section passed the legislature last year, but Mr Buhari refused to sign it in August. He has since pledged to sign a reworked version of the bill.
Annual oil production in Nigeria fell 26 per cent in the decade to 2017, according to the US Energy Information Administration. While some of the decline can be explained by militancy in the Niger Delta region, analysts also point to the fact that older fields are not being replaced by investment in new fields as wary investors steer clear.
The petroleum reform legislation is designed to bring transparency to the opaque state-run NNPC, which has long been seen as a cash cow for the political class. It would strip the oil minister of the ability to award, revoke or renew licences.
Like some of his predecessors, Mr Buhari also appointed himself oil minister. Mr Abubakar said he would not also serve as oil minister because he was “not qualified”.
While passage of the bill and related reforms are expected to spur investment, Charles Robertson, chief economist at Renaissance Capital, said he was not making any projections yet. “After . . . years of waiting, I’ve given up forecasting FDI growth from passage of the PIB.”
