Nigeria: Oil field auction may be up to 2B barrels

If successfully carried out, the oil auction could propel Nigeria back to Africa’s top oil producer. Militant violence and oil thefts have cut Nigeria’s oil production by about 1 million barrels a day, allowing Angola to surge ahead.

LAGOS, Nigeria  _ Nigeria will auction off rights to oil fields that may contain up to 2 billion barrels by the end of the year, an effort that could put the West African nation back as the continent’s leading oil producer, according to a presidential adviser.

Emmanuel Egbogah, who serves as President Umaru Yar’Adua’s oil adviser, said Tuesday the auction will include both land and water leases. The Nigerian government has yet to decide what leases will be offered in the auction, but Egbogah said he expected the nation’s petroleum minister to make an announcement in the coming months.

The lands include those relinquished by the oil companies already working fields in Nigeria, Egbogah said. He expects China will be among those bidding to enter the nation’s oil market. The Chinese have been in negotiations with Nigeria for months and reportedly have offered $50 billion for 6 billion barrels of oil.

Egbogah declined to offer any specifics about the ongoing negotiations.

“I’m sure that if you have a hungry system like China, when the announcement is made, they’ll have an interest,” he said.

The Financial Times first reported news of the auction Tuesday.

If successfully carried out, the oil auction could propel Nigeria back to Africa’s top oil producer. Militant violence and oil thefts have cut Nigeria’s oil production by about 1 million barrels a day, allowing Angola to surge ahead. Still, Nigeria’s oil remains popular in U.S. as it is easier to refine. It is the third largest oil exporter to the U.S., behind Canada and Mexico.

With Nigeria’s position in the U.S. market, attacks, kidnappings and pipeline breaks in the Niger Delta have greatly swayed global oil prices since 2006. Militants there demand that the federal government send more oil-industry funds to Nigeria’s southern region, which remains poor despite five decades of oil production.

A presidential amnesty program brought a calm to the Delta. However, the program appears to have stalled as Yar’Adua has been in Saudi Arabia for more than two months to receive medical treatment for what his doctor described a heart condition.

The Movement for the Emancipation of the Niger Delta, the largest militant group in the region, announced Saturday it had abandoned the cease-fire agreement. Meanwhile, a Royal Dutch Shell PLC ruptured after the military says thieves tried to steal crude oil from it.

Egbogah dismissed the idea that the Delta remained a dangerous place for foreign oil workers and their companies.

“Some minor incidents can be used to say that the security situation is as bad as it was in the past,” he said. “I think the situation is cooling off.”

Oil workers also complain government approvals for their leases have stalled in Yar’Adua’s absence. While ExxonMobil Corp. already had its Nigerian oil field licenses renewed, Shell and Chevron Corp. still are in negotiations with the government. Shell also has announced its desire to sell off its rights to three oil fields.

It remains unclear what effect Yar’Adua’s absence may have on the proposed auction.

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