London, 2 August 2010

Nigeria will pass wideranging legislation to reform its oil and gas industry in the coming weeks and hold a licensing round for new oil blocks by the end of the year, Oil Minister Deziani Allison-Madueke told Reuters. The Petroleum Industry Bill (PIB) will rewrite Nigeria's decades-old relationship with its foreign oil partners, altering everything from the fiscal framework for offshore oil projects to the involvement of indigenous firms in the sector.

Oil executives have said uncertainty over the passage of the legislation, which has been subject to numerous revisions and debate, has meant billions of dollars of potential investment are on hold in Africa's biggest oil and gas industry.

"The PIB will be passed by the end of August. The House (of Representatives) goes into recess in early August. We have strong indications that it will be passed before early August, if they have to delay recess then they will," Allison- Madueke told Reuters in an interview in London.

Africa's most populous nation is due to hold presidential and parliamentary polls in January, and there have been questions as to whether parliament will have time to pass the legislation before the current presidential term ends. Allison-Madueke said international oil companies (IOCs) were being fully consulted on the legislation and that the fiscal framework for deepwater projects -- one of the major concerns for the industry -- had improved in the latest revisions.

"The National Assembly has made adjustments in fiscal deepwater terms ... The terms have got slightly better for IOCs over the last two weeks. We are still looking at fiscal deepwater terms and there could be some tweaking," she said.

Royal Dutch Shell's Nigeria boss told Reuters last month the firm had some $40 billion worth of potential investment in deepwater oil projects in Nigeria on hold amid uncertainty over the regulatory framework. Offshore is where Nigeria expects to see much of its production growth in the coming years, and the industry is keen for clarity on the terms of its investments.

Shell, Nigeria's oldest foreign oil partner, estimated the industry-wide investment in Nigerian deepwater projects at around $4 billion last year and expects offshore output to rise to about 1.5 million barrels per day (bpd) by 2015, equivalent to half the country's installed capacity.

CHINA, U.S. INTEREST

Clarity over Nigeria's regulatory framework will mean investors being able to take more informed decisions in a planned oil licensing round, which Allison-Madueke said would still go ahead this year. She said the marginal bid round would include at least 40 blocks and that there was interest from a number of sources, including China and the United States.

"There will be a licensing round before the end of the year. ... China is always interested but there are a wide variety of interested parties, including America," she said.

The OPEC member holds periodic licensing rounds for new blocks and has said the next will be a chance for domestic companies and foreign firms new to Nigeria to gain a foothold. Officials have said the next auction is likely to be for both onshore and offshore fields totalling at least 2 billion barrels. China made a proposal late last year to buy 6 billion barrels of Nigerian oil. Although Nigeria could sell stakes in its existing joint ventures with Western oil firms, Beijing is seen as more likely to succeed in bidding for new acreage.

Part of the aim of the PIB is for indigenous firms to have a greater stake in the Nigerian industry, and Allison- Madueke said she expected international oil firms to sell some of their marginal blocks this year. Shell agreed to sell its stake in three onshore licences to a consortium involving local firms and France's Maurel & Prom earlier this year and has said it could sell more fields in Nigeria. A local newspaper reported this week it had offered to sell five more leases to local firms.

"There has been no formal approach by Shell (about selling) ... but I expect most of the IOCs will put up some of their blocks this year, probably before or at the same time as the next bid round," Allison-Madueke said. She said outstanding licences renewals with foreign oil firms, for leases which lapsed more than a year ago, would be resolved within the next two to three months.

REVISING OPEC QUOTA

Allison-Madueke, Nigeria's first female oil minister who took office earlier this year, said Nigeria was currently producing around 1.8 million barrels per day (bpd) of crude oil and around 700,000 bpd of condensate. She said the country was capable of producing a total of 3 million bpd including condensate within the next 6-12 months but was prevented from doing so by its OPEC output quota.

The quota was set at a time when militant attacks on oil infrastructure in the Niger Delta were capping Nigerian production and she said that quota now needed to be revised in the wake of an amnesty in the wetlands region.

"When the quota restrictions were put in place was at the height of the militancy. Now the amnesty is in place, the levels are steadily increasing," she said. "As the levels are increasing, we would like to return to pre-militant levels and possibly exceed those levels." Nigeria's implied OPEC output target currently stands at 1.67 million bpd. The country was consistently producing above 2 million bpd before the period of militant attacks, which were at their most intense in 2006 and the following few years.

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