2nd UPDATE:China's CNOOC In Nigeria Oil-Block Talks-Officials
September 29 2009 - 8:24AM
Dow Jones News
The Nigerian government said Tuesday it is in advanced talks
with China's CNOOC Ltd. (CEO) over signing deals on several onshore
oil blocks as the state-run company looks to expand its position in
the West African nation by securing drilling rights going unused by
Western energy firms.
Companies such as Anglo-Dutch Royal Dutch Shell PLC (RDSA) have
long been at loggerheads with the Nigerian government over not
fully utilizing some of their drilling licenses, often for not
having secure enough operating conditions due to militant attacks
on pipelines and other oil infrastructure.
"We are in talks with many companies at the moment and certainly
CNOOC is one of those. They have been a good company for us and we
will see what happens," Nigerian Oil Minister Rilwanu Lukman said
by telephone.
An official with Nigeria's state oil company said the number of
onshore blocks on offer was about 20 and that negotiations were at
a late stage with some of those firms, including CNOOC.
The official said he was unsure exactly how much crude CNOOC was
vying for but said targeted investment would run into several
billion dollars.
While any deals would beef up its petroleum presence in the
country, China's record in recent years in converting deals in
Nigeria into new crude production has been lackluster, often for
government bureaucratic reasons.
Chatham House, a U.K. think tank, earlier this year published a
study highlighting how a series of oil deals Asian oil companies,
including Chinese state-run firms, signed with the Nigerian
government back in 2004-2005 in exchange for bankrolling
infrastructure projects had generally failed to produce their
intended result.
The biggest reason for the failure, it said, was the Nigerian
government's lack of "follow-up mechanisms to enforce the
deals."
It is unclear if CNOOC is offering to stump up wads of cash on
more non-oil projects in the latest round of contract
negotiations.
The Nigerian government is hoping a recent lull in militant
violence in the country's main oil-producing Niger Delta region
will continue so producers can restart operations in various
areas.
The International Energy Agency in Paris estimates that around
500,000 barrels a day of oil production capacity has been shuttered
in Nigeria over the past several years due to militant attacks.
Getting that capacity back into service has been routinely hobbled
by security problems. Nigeria currently pumps around 1.8
million-1.9 million barrels a day.
"We think conditions are improving so that production can get
going again in many areas," the official with Nigeria's state oil
company said.
Analysts, however, say the government's policy of paying
militants to lay down their arms has generally failed because the
root causes of the militancy - poverty and lack of education and
life opportunities - haven't been tackled.
The Nigerian government has grown more critical of U.S. and
European oil companies - still the biggest operators in Nigeria
despite the influx of Asian companies the past five years - for not
fully utilizing their onshore drilling licenses. Analysts say the
criticism is a bargaining tactic.
In the past year or so, Shell has sold some of its unused
drilling rights in the country to other companies. Shell is still
looking to sell some additional oil acreage in Nigeria but not on a
large scale, a person familiar with the matter said Tuesday.
CNOOC officials couldn't be reached for comment.
-By Spencer Swartz, +44 207 842 9357;
spencer.swartz@dowjones.com
(James Herron, Benoit Faucon, and Yvonne Lee contributed to this
article.)