Royal Dutch Shell (LON:RDSA) has started renegotiating oil contracts with Nigeria, the Financial Times has reported. The talks could lead to major energy companies generating billions of dollars less in revenues from lucrative offshore blocks in Africa’s largest producer.
Shell’s share price has been steady in London this morning, having inched 0.32 percent higher to 2,495.00p as of 08:02 BST. The stock is fractionally outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.25 percent higher at 7,296.13 points. The group’s shares have given up nearly three percent of their value over the past year, as compared with about a 5.6-percent fall in the Footsie.
Shell and Nigeria start contract talks
The FT reported over the weekend that Nigeria had been enegotiating oil contracts with Shell. The country has several types of contracts with energy majors including joint ventures for onshore blocks, in which the government has an equity stake, and production-sharing agreements for the deepwater ones.
“We’ll be looking to better terms than the previous [production-sharing contracts],” Emmanuel Ibe Kachikwu, minister of state for petroleum, said, as quoted by the newspaper. “We would like to get better packages.” He explained that the old agreements favoured the foreign companies, giving them as much as 80 percent of the oil that was produced after costs — known as profit oil — against the 20 percent for the state.
Analysts on Anglo-Dutch oil major
Jefferies, which is bullish on the FTSE 100 group with a ‘buy’ rating, lifted its target on the Shell share price from 2,950p to 3,000p on Friday. According to MarketBeat, the blue-chip group currently has a consensus ‘buy’ rating and an average valuation of 2,976.54p.
Shell updated investors on its first-quarter performance earlier this month, posting what it referred to as a ‘strong start’ to the year.