Three of the world’s biggest oil companies are poised to pay hundreds of millions of dollars to hold on to prime concessions in Nigeria following keen Chinese interest in the planet’s 10th richest crude reserves.
ExxonMobil, the largest US oil group, is to pay a “signature bonus” of as much as $600m after securing a new 20-year lease to three blocks it has operated for four decades and which currently produce 580,000 barrels a day, people familiar with the situation said.
Royal Dutch Shell is close to finalising similar renewals that might see it surrender some concessions, industry insiders said, while Chevron, the second placed US group, is yet to agree a deal even after some of its leases expired at the end of last month.
The negotiations underscore the importance of Nigeria’s oil, both to western groups whose traditional dominance is weakening, and to the country’s government, which depends on petroleum revenues for 80 per cent of its income.
Militant attacks in the oil-producing Niger Delta, coupled with under-investment, have seen production fall well below capacity in recent years.
The leases expired a year ago but were extended for 12 months. Shell took out a court injunction to prevent any change of ownership before entering talks.
Few people expected big oil groups, which have been the mainstay of the industry through its 50-year history, to be ejected from blocks they operate as minority partners in joint ventures. But one person familiar with Exxon’s renewal talks said they were like “a cliff-hanger”, and concluded only days before the leases lapsed.
Cnooc, the Chinese state-owned oil company, in June sought to buy stakes in 23 blocks – including some of those up for renewal – in order to secure as many as one in six of Nigeria’s 36bn barrels of reserves.
Cnooc is willing to pay up to $50bn for the stakes, Nigerian officials said, but it may be granted far fewer than it is seeking.
Odein Ajumogobia, minister of state for oil, has said the government would be willing to sell part of its own holdings in the joint ventures to the Chinese.
Several people with knowledge of the renewal talks said the competition from China – which has signed several big energy deals in Africa to fuel its growth – had strengthened the government’s hand.
The Nigerian government hopes to use the money raised from the leases to plug part of a $10bn deficit in next year’s budget, a senior official said.
The companies declined to comment.
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