VZCZCXRO4352
PP RUEHMA RUEHPA
DE RUEHOS #0717 3041438
ZNR UUUUU ZZH
P 311438Z OCT 07
FM AMCONSUL LAGOS
TO RUEHZK/ECOWAS COLLECTIVE PRIORITY
RUEHUJA/AMEMBASSY ABUJA PRIORITY 9322
RUEHC/SECSTATE WASHDC PRIORITY 9553
INFO RUFOADA/JAC MOLESWORTH AFB UK
RUEKJCS/SECDEF WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC

UNCLAS LAGOS 000717 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DOE FOR GPERSON, CGAY 
 
E.O. 12958: N/A 
TAGS: EPET ENRG PGOV NI
SUBJECT: OIL ADVISOR SAYS NIGERIA IS NO VENEZUELA 
 
¶1. (SBU) Summary.  The Nigerian president's special advisor 
on petroleum said that recent press reports on petroleum 
contract renegotiations were overblown and Nigeria was "no 
Venezuela."  He clarified that the older oil production 
contracts were past due to be reworked, but the process will 
take some time and they will not all be done at once.  These 
contract reviews are likely connected to plans to reform the 
Nigerian oil and gas sector.  End Summary. 
 
¶2. (SBU) In a meeting with Econoffs, the Special Advisor to 
the President on Petroleum Matters, Dr. O. Emmanuel Egbogah 
said that recent international and local press stories that 
Nigeria was renegotiating all its oil contracts were 
overheated.  (Note: During a recent press conference, another 
presidential advisor, Rilwanu Lukman, told reporters that 
Nigeria would renegotiate its oil production contracts with 
the international oil companies (IOCs).  That led to much 
press speculation about the scope of the renegotiations.  End 
Note).  Egbogah took pains to point out that Nigeria was not 
going to attempt to replicate what happened in Venezuela. 
According to Egbogah, only the joint venture contracts with 
the IOCs would be reviewed.  Most of these contracts are with 
Shell and Chevron and cover onshore and some shallow offshore 
oil fields. Some of the contracts date back twenty years and, 
although their terms permit periodic renegotiation, few have 
ever been updated.  Deeper offshore oil fields use more 
modern production sharing contracts (PSCs) which will not be 
renegotiated at this time.  Egbogah said that the PSCs were 
"working okay." 
 
¶3. (SBU) According to Egbogah, as part of the renegotiations, 
Nigeria will likely seek to change the structure of the 
contracts from unincorporated joint ventures to incorporated 
joint ventures.  Incorporating the joint ventures, Egbogah 
claims, would permit the partners to seek funding from third 
parties and end the cash calls that Nigeria has been unable 
or unwilling to meet.  Egbogah acknowledged that Nigeria is 
currently about 5 billion USD in arrears in cash call 
payments.  Contracts will be reviewed on a rolling basis, not 
all at once, and the process is likely to take months, if not 
longer.  Egbogah told Econoffs that plans for renegotiating 
the contracts were made in consultation with the oil 
companies and he routinely meets with the IOC managing 
directors to discuss the issue.  He said the push to 
renegotiate is part of larger plans to restructure the 
Nigerian National Petroleum Corporation (NNPC). 
 
¶4. (U) Egbogah has a significant international petroleum 
resume.  He did his undergraduate studies in Moscow in the 
1960's and earned his PhD in petroleum engineering from 
Imperial College in London in 1979.  Egbogah is the chairman 
of several small international energy companies and worked 
for the Malaysian state oil company PETRONAS as a technical 
advisor in the 1990's.  He has also worked for oil companies 
in Libya and Canada. 
 
¶5. (SBU) Comment:  Egbogah's comments are reassuring in light 
of the uncertainty that followed Lukman's press conference. 
Such public comments need to been seen in the context of a 
future restructuring of the NNPC.  Both reflect the Nigerian 
government's desire to end the burden of cash call payments 
to the joint ventures.  The IOCs routinely cite Nigeria's 
failure to meet its funding obligations as a serious 
impediment to expansion of the oil and gas sector.  An 
incorporated joint venture structure may be an acceptable 
solution for all parties.  End Comment. 
HUTCHINSON