Yar’Adua, Shell MD to meet in Switzerland on Friday

24.01.2008

SHELL’S Chief Executive, Jeroen van der Veer, said on Wednesday he would meet with President Umaru Yar’Adua tomorrow to discuss security and energy funding issues, and added that a restart of output lost through ethnic unrest was still some way off.

In an interview with Dow Jones Newswires, van der Veer said the company hoped to regain its share of lost oil output but “conditions must improve for us to restart production and we’re not there yet.”

Nigeria, Africa’s largest oil producer, has a quota of 2.5 million barrels a day assigned by the Organisation of Petroleum Exporting Countries. But oil industry officials said actual output had been cut by at least 25 per cent by the action of militants in the Niger Delta.

Van der Veer said that at his meeting with Yar’Adua, “we have lots to talk about. It’s not only about security, it’s also about funding. The lack of funding for some projects has caused issues with meeting targets...it’s prevented us from ending all gas flaring.” Flaring is a decades-old industry practice used to dispose of natural gas that is often found with deposits of crude oil but can’t easily be used for economic activities, because of a lack of pipelines and other infrastructure.

Nigeria is the world’s biggest gas flarer alongside Russia, and the government initially set a 2008 deadline to end gas flaring in the country.

However, oil companies said the government had failed to provide the financing necessary to execute joint flaring-reduction programmes.

As part of a larger reforms underway in the energy sector, the Yar’Adua government has said it wants to inject more predictability into financing energy projects by enlisting well-capitalised Nigerian banks, which have been adopting Western accounting practices. Banks, rather than the state, would make investments with oil companies, under some of the plans being considered.

The state could then shift some $3 billion - $5 billion it commits annually to joint projects with foreign companies to social programmes.

Ending flaring at some 1,000 wells across Nigeria could cost up to $6 billion, Anne Pickard, regional vice president of Shell’s exploration and production unit in Africa, has said previously.

Shell has already spent $3 billion on the effort, but was waiting for matching funding from the Nigerian government to finish the job, she said.

President Yar’Adua, in Switzerland, also said Nigeria would support an increase in OPEC oil output at the group’s February 1 meeting if it was needed to stabilise the market.

“We’ll support more production if that will help stabilise the market,” he told Reuters at the ongoing World Economic Summit in Davos, Switzerland, on Wednesday.

“I am concerned about oil prices... we want to see a reasonable oil price that will stabilise the market,” Yar’ Adua said. “We believe [a] continuing rise in the oil price will in the long run suppress demand and that will affect our economies.”