In a significant setback for Nigeria’s oil and gas industry, Shell has reportedly withdrawn from a Memorandum of Understanding (MoU) with the Nigerian National Petroleum Company Limited (NNPC) and the Nigerian Content Development and Monitoring Board (NCDMB). This move aims to streamline upstream project contracting cycles and hasten the development of major oil and gas assets.
Sources at THIS DAY LIVE reveal that Shell’s withdrawal might be a strategic ploy to pressure the Nigerian government into suspending certain national laws and granting additional waivers. Shell’s demands come after receiving initial waivers to expedite the development of some offshore projects.
At the recent 41st Annual International Conference and Exhibition of the Nigerian Association of Petroleum Explorationists (NAPE) in Lagos, NCDMB Executive Secretary Mr. Simbi Wabote hinted at Shell’s departure from the September 2023 tripartite agreement. He expressed concern over the reluctance of International Oil Companies (IOCs), particularly Shell, to invest in Nigeria.
This development coincides with NNPC’s lamentation over the resurgence of portfolio managers in the industry, attributed to the Nigerian Local Content Act. The September MoU aimed to slash the contracting cycle by 81.6%, reducing it from the current 327 days to a more manageable 180 working days.
NNPC had previously stated that this initiative would enhance ease of business, drive efficiency, and lead to increased production and profitability. The MoU’s framework promised to significantly impact economic growth and bring value to stakeholders, including investors, companies, host communities, and the nation.
However, during a panel session at the NAPE conference, Wabote stressed that reliance on IOCs would not propel Nigeria’s asset development. He criticized Shell for continually seeking further waivers beyond those agreed upon, particularly for its Bonga Southwest and other shallow offshore projects. Wabote questioned Shell’s commitment to investing in these projects, citing their prolonged development history and Shell’s insistence on setting aside Nigerian laws for their advancement.
According to a report by This Day Live, Eyesan, Executive Vice President (Upstream) at NNPC, echoed these sentiments. She noted that while the Nigerian Content Act had some positive impacts, it also brought challenges, including the advent of portfolio managers, complicating project financing. Eyesan highlighted other industry challenges, such as lengthy contracting processes, political and regulatory risks, and financial uncertainties impacting investor confidence.
The oil and gas sector in Nigeria faces operational risks, including security concerns in the Niger Delta and technological limitations. Eyesan stressed the need for stability in regulations and the fiscal environment to attract foreign investment effectively.
These recent developments in Nigeria’s oil and gas sector, marked by Shell’s withdrawal and the complexities surrounding the implementation of local content policies, spotlight the challenges in managing the country’s vast energy resources. They also underline the need for strategic approaches to ensure sustainable development and attract international investment.
