Scraping the Barrel… 26 July 2012
Agent provocateur-cum-oil industry observer Jeremy Weate offers a pithy take on Nigeria’s draft Petroleum Industry Bill (PIB) in this guest blog at Platform London. “In no country, should governance reform begin with a new law,” Weate writes; but in Nigeria, there seems to be hope that the PIB once ratified would do just that. So, what would the bill’s impact be? The draft mentions transparency, but mainly as a sort of glossy veneer; and provisions on an accountable oil-flow metering system to counter the trade of stolen oil are weak. The bill does not give the new petroleum regulatory agency the autonomy it needs to drive dramatic sector growth; and attempts at development through a fund that allocates 10% of net profits to host communities, while potentially helpful, could fuel conflict by not defining the communities it seeks to support. But the work of making Nigeria’s oil industry more efficient, accountable and transparent will not be achieved by the PIB alone. That would require debate around a long-term vision and strategy for governance reform – which does not appear to be happening yet.
Life is nasty, brutish and short for overstretched oil producers when oil prices fall, as they are now. It used to be US and European heavyweights like Exxon, BP and Shell that would gobble up smaller competitors when prices dipped; today, state-backed rivals from energy-hungry Asian nations are elbowing them out of the way. This is but one symptom of a shift in the balance of power that is accelerating away from Western “majors” and toward Asian state-backed firms and smaller, more nimble oil service specialist companies like Schlumberger and Halliburton. In the not-so-distant past, China’s CNOOC’s bid for a 61% share of Canadian group Nexen and the simultaneous purchase of $1.5 billion of North Sea assets by fellow Chinese company Sinopec was almost unthinkable. Today, Western majors seem just to be “pedaling fast to stand still,” of which industry observers can expect to see more in the future.
As the Liberal Democrat and Conservative parties debate the relative importance of gas and renewable energy in the UK’s future energy mix, neither side seems to have gained the upper hand. LibDem Energy Secretary Ed Davey announced a cut to onshore wind subsidies that was smaller than what some Conservative parliamentarians had wanted, while boosting or maintaining other renewables incentives; but the announcement also included further tax breaks for offshore gas fields. Both industries were left buzzing and, in some cases, scratching their heads – and amid all the “political horse-trading” it’s not clear as yet which side wins. The debate appears likely to continue for a while yet as both sides position themselves for an impending debate over a new energy bill – huffing and puffing all around, smelling a lot like legislators looking to buy a little extra political time.