UPDATE 2-Shell says appetite for Nigeria exploration waning
* Oil theft, regulatory uncertainty holding back exploration
* Nigeria could double output to 4 million bpd, Shell says
* Oil minister admits problems, sees 2.68 million bpd soon
By Joe Brock
ABUJA, Feb 21 (Reuters) - Attacks on oil pipelines, a dearth of funding from the state oil firm and regulatory uncertainty have dampened appetite for exploration of Nigeria's huge oil and gas reserves, its biggest producer Royal Dutch Shell said on Tuesday.
In a speech to an oil and gas conference in the capital Abuja, Ian Craig, Shell's director for sub-Saharan Africa, said Nigeria could produce 4 million barrels of oil per day (bpd) but that big changes would be needed for this to happen.
"We still face major challenges ... (there is) chronic underfunding of the onshore joint ventures where NNPC (the national oil company) is the majority shareholder," Craig told the conference.
"The greatest challenge, however, is the massive organised oil theft business and the criminality and corruption which it fosters. This drives away talent ... increases costs, reduces revenues both for investors and the government and results in major environmental impacts," he added.
Nigeria currently produces around 2.5 million bpd of combined crude oil and condensate, and this will soon increase by 180,000 bpd, Oil Minister Diezani Allison-Madueke said in a speech.
Craig said loss of oil to theft in Nigeria was currently in the region of around 150,000 barrels per day.
Thieves in the oil-rich Niger Delta use explosives or even just hacksaws to cut open pipelines and siphon out oil, a practice known as bunkering that hurts production and is thought to be part of a large international criminal enterprise.
Since an amnesty for militants in 2009, attacks on oil facilities have become much less frequent and less destructive, but bunkering operations remain a costly headache.
Regulatory uncertainty, meanwhile, will be cleared up only by the Petroleum Industry Bill, which aims to change everything from fiscal terms to an overhaul of the state oil company but which has been stuck in the National Assembly for years.
It shows no sign of being passed soon. President Goodluck Jonathan told Reuters in an interview last month he expected a final version to be submitted to parliament by the end of this month, but nothing has surfaced yet.
"The challenges I have described in the onshore, shallow water and gas sectors have held back development and have unfortunately led to a reduced appetite for exploration," Craig said.
The output rise in Angola had proven that Nigeria's oil development is well below potential, he said.
French energy major Total said on Monday production from its Nigerian Usan offshore oil project would begin next month.
"A major enhancement of deepwater oil production was achieved as a result of the arrival of the FPSO Usan into the Nigerian waters ... in a few weeks oil production will increase by about 180,000 barrels per day," Allison-Madueke said.
Nigeria has for decades milked profits from crude exports rather than investing in local downstream infrastructure. Refining capacity has fallen in the last decade, despite several government promises and missed targets.
Most of its motor fuel is imported, despite the fact that its crude is amongst the sweetest and lightest on the market.
All refineries will be working at 90 percent of their capacity in the next two years after maintenance is completed by the original construction companies, Allison-Madueke said. Currently all operate at below 30 percent.
She conceded there were major problems in Nigeria's oil industry in a question and answer session.
"We are mindful of the challenges still within the sector, mostly characterised by sabotage, financial leakages, lack of structure and other deep-rooted inefficiencies ... There is undoubtedly a need for change," she said.
Chief amongst complaints by Nigerians is the massive corruption in the sector, which siphons off billions of dollars in a country of woefully inadequate infrastructure where the majority live on less than $1 per day.
A week of protests over fuel prices put Nigeria's government under more pressure than ever to make good on long-unfulfilled promises to reform its corrupt energy sector.
Allison-Madueke said she expected an investigation by the Economic and Financial Crimes Commission that she set up last month in the wake of the protests to deliver results soon.
"They've been at it for the past three to four weeks since we invited them in, and I have no doubt they will soon come out with ... a final report. But they work as an independent body, therefore I cannot facilitate or fast-track what they do," she said.
Past investigations into oil industry irregularities have produced reports that went nowhere.
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