Nigeria Offers ‘Revolutionary’ Oil Deal to Delta

Nigeria plans to transfer 10 per cent of all its oil and gas ventures to the inhabitants of the oil-producing Niger Delta, in an attempt to end a rebellion that has hampered production in sub-Saharan Africa’s leading energy supplier. The initiative, which comes against the backdrop of a sweeping attempt to overhaul Nigeria’s oil industry would, if approved, by parliament signal a bold new phase in government efforts to broker a lasting settlement in the

 delta. But first it has to overcome the anticipated objections of representatives of other regions.


The latest overture follows an amnesty that has lured into the open some of the main leaders of the militants who have led a sustained campaign in the delta region against the federal government and the oil industry.

Emmanuel Egbogah, the president’s special adviser on oil, told the Financial Times that Umaru Yar’Adua, president, has backed the idea of transfering to delta communities 10 per cent stakes from the holdings of the national oil company in the joint ventures that exploit Nigeria’s vast reserves,

Mr Egbogah said he intended to add the proposal to reforms that the government hopes to enact by the end of the year, which would also impose tougher terms on oil companies but which are currently embroiled in a tortuous debate in parliament.

A Chinese offer for up to a sixth of the country’s reserves – including stakes in some blocks operated by Royal Dutch Shell, ExxonMobil and Chevron – has raised the stakes still further.

The plan for the delta was “a serious one, a major one, something quite revolutionary”, Mr Egbogah contended.

The initiative is aimed at answering a longstanding demand from the delta’s fighters and activists, ethnic leaders and aggrieved communities for a share in the ownership of the oil that generates 80 per cent of government revenue.

All citizens of oil-bearing communities would be entitled to cash benefits, delivered through a trust-style mechanism, which they could use individually or pool for social projects. It was unclear how the government would apportion the stakes and avert competition between different communities for a larger slice of them.

The rest of Africa’s most populous nation could face reduced incomeas a result but potentially this would be offset by higher output, if the initiative led to a reduction in sabotage of the oil industry.

Mr Egbogah said the 10 per cent stakes would pay dividends on revenues after taxes and costs to communities, bypassing powerful governors of the eight oil-producing states who were instead calling for an increase in the extra share of petroleum revenues they already receive. The stakes could not be resold.

The government hopes to provide a disincentive to oil-theft and sabotage by linking the earnings of each qualifying community to production from the joint venture that extracts its resources.

“These benefits will flow directly to them,” Mr Egbogah said. “Every community, whether blind or deaf or dumb, every citizen will say: ‘I own a part of this business.’ ”

Attacks on oil facilities have cut production in Nigeria, an important supplier to the US, by as much as 40 per cent in recent years. A multibillion dollar trade in stolen oil has flourished while the majority of the delta’s estimated 28m people live amid despoiled waterways often lacking basic services.

The misery persists in spite of the oil-state governments receiving an additional 13 per cent of national petroleum revenues, making their budgets two or three times the size of those in some other regions.

Mr Egbogah said the plan would cover “all petroleum assets in the country” but added that “obviously there are no oil-producing communities in the offshore”, which is home to major deepwater fields.

Seven onshore joint ventures between the state-owned Nigerian National Petroleum Corporation and foreign oil groups in the delta account for 70 per cent of Nigeria’s production. The NNPC holds between 55 per cent and 60 per cent in each.

Officials believe the community stakes could see well over Naira50bn ($338m €227m, £207m) diverted to the communities in its first year.

Shell said its joint venture, which produced 17 per cent of Nigeria’s output last year, has contributed $34bn (€23bn, £21bn) to the government in the past four years. The Anglo-Dutch group said the government received 95 per cent of all onshore revenue after costs.