Nigeria to renegotiate PSC contracts with oil majors

Nigeria’s state oil company plans to renegotiate its production-sharing agreements with oil majors as Africa’s top crude producer tries to push ahead with a clean-up of the sector that is the lifeblood of its economy.

“We intend to begin the process of the renegotiation of the PSCs to see what value chain and improvements we can have from these contracts”, Ibe Kachikwu, the new head of the Nigerian National Petroleum Corporation, said in a statement.

The NNPC said it would overhaul its contracts with companies such as Shell , Chevron, Eni and ExxonMobil “in the weeks and months ahead…to extract as much benefit as possible for Nigeria”, according to the emailed statement.

Nigeria, which gets 70 per cent of government revenues from oil, has been hit hard by the plunge in global oil prices and has recently spent billions trying to defend its currency, which the market believes needs to be devalued for the third time in less than a year.

Shortly after Kachikwu was appointed by President Muhammadu Buhari  last month, he announced the NNPC would be reviewing all its contracts with oil companies and would be aiming to boost revenues for the government in light of the oil price crash.

Tuesday’s remarks, however, seemed to suggest he intended to push to change the terms of the production sharing agreements the government has with majors.

“Some of the contracts were negotiated over 20 years ago and they have since been overtaken by new realities in the industry,’’ said Kachikwu, speaking on Tuesday in France on a state visit with Buhari.

Shell and Eni declined to comment on the remarks.

Buhari took office in late May, riding a wave of optimism after he made history by defeating incumbent Goodluck Jonathan on a pledge to root out the rot in the Nigerian state.

Some experts wonder if it is realistic for the government to attempt to renegotiate terms now.

“Revisiting the PSC terms has been on the government’s to-do list for years, but it will be tough in this low-price context”, said Alexandra Gillies, director of governance programmes at the Natural Resource Governance Institute in New York.