* Stalled oil reforms hold key to unlocking investment
* Refining, gas, Niger Delta are major challenges
* Nigeria has vast latent petroleum potential
By Joe Brock
ABUJA, July 7 Nigeria's returning oil minister
may have the support of the president but with Africa's largest
energy industry stalling she will need to show swift progress to
prove her critics wrong and attract much-needed investment.
President Goodluck Jonathan showed his faith in Deziani
Alison-Madueke, Nigeria's first female oil minister by
re-appointing her on Saturday after she spent less than a year
in his cabinet prior to April's elections.
She has had a mixed reception elsewhere.
Nigeria's vocal press criticised her before her return to
cabinet about a lack of transparency on oil deals and an action
group is seeking an injunction against her re-appointment
because it says she didn't complete national service.
Foreign oil companies have been critical of her, partly
because she repeatedly said a wide-ranging energy reform bill
was about to pass into law but it never did.
"Her challenge now will be to build an effective working
relationship with some of the local and international oil
companies that made it clear they hoped she would be replaced,"
said Antony Goldman, Nigeria expert and head of PM Consulting.
"But she had the steadfast support of the presidency,
without which no minister can survive," he added.
In her favour is an oil industry bursting with potential.
Crude oil production has recovered to over 2 million barrels per
day (bpd) and remained there for over a year while the world's
eighth largest natural gas reserves are largely untapped.
The stalling of oil reforms is shackling progress in
Nigeria's energy sector because foreign investors don't want to
put money into an industry without a clear tax framework and an
undefined role for a state-oil company with a chequered history.
During her screening by Nigeria's Senate last week,
Alison-Madueke hinted the long-delayed Petroleum Industry Bill
(PIB) may need more work, potentially prolonging uncertainty
which has already cost billions of dollars in lost investment.
One of Alison-Madueke's first tasks will be to decide
whether to approve four onshore oil block sale deals Royal Dutch
Shell (RDSa.L) has agreed with foreign and local firms.
It is unusual for oil companies to sell producing assets and
the move by Nigeria's oldest foreign oil partner demonstrates
how the biggest players see the country's main future production
potential coming from deep offshore rather than onshore.
But a varied oil producer network involving more local
players could benefit the long-term development of Nigeria's oil
basin and the passage of these deals would give confidence to
investors looking to secure deals in other oil blocks.
While Nigeria's upstream business has made little progress
since the PIB was first introduced as a concept four years ago,
the downstream sector remains insufficient to support the fuel
needs of Africa's most populous nation.
Alison-Madueke has said refineries are undergoing
maintenance that will boost capacity while agreements with a
Chinese firm to build three more facilities have been signed.
But similar deals in the past have failed to materialise.
Despite its high crude production Nigeria imports most of
its oil products while most of the country's 150 million
residents live without power, stunting the development of
sub-Saharan Africa's second-largest economy.
Improved power generation would aid economic development in
the wetlands swamps of the Niger Delta which will be key to
maintaining what has arguably been the most successful
development in Nigeria's oil industry in the last five years.
An amnesty for oil militants in 2009 halted attacks on oil
facilities, which cut out more than a third of Nigeria's oil
production at their height three years earlier.
Former militants are paid stipends and are undergoing
training but without long-term jobs, youths disillusioned with
the lack of opportunities could return to the lucrative illegal
trade of oil bunkering and pipeline sabotage.
Standing in the way of Alison-Madueke's goals are long-term
vested interests in petroleum product importation, a state-oil
firm not fit for purpose and squabbling stakeholders. The
priority must be to push through some type of reforms.
"The oil minister must be aware that much further delay in
the passing of the bill will impact perceptions of her ability
to fill the role effectively," said Elizabeth Donnelly, Africa
manager at London-based think tank Chatham House.
(Editing by Nick Tattersall and James Jukwey)