Imo Itsueli had no problem finding oil in the Niger delta, or even extracting it. His troubles started when the crude was loaded on to a barge for a nine-hour journey through the forested creeks to the port.
"Gunmen would suddenly block the river, seize your barge and take it away," says Mr. Itsueli, founder and chairman of Dubri Oil, the oldest Nigerian-owned petroleum company. "It was rough."
At its peak, just three years ago, insecurity in the delta cut output in Africa's largest oil producer by up to 40 per cent, to less than 1.7 million barrels per day. But an amnesty program for militants that began in 2009 has gradually quelled the unrest.
Yet while improved security and high global prices should now spur investment, Dubri Oil, which produces about 1,000 barrels per day, remains cautious. Instead of guns, it is now legislation – or rather the lack of it – that is the main handbrake on growth in the oil sector of Africa's largest producer. "Uncertainty about the petroleum industry bill is the main thing holding us all back," says Mr. Itsueli.
First drafted in 2008, the bill was intended to bring Nigeria's opaque and dysfunctional oil and gas industry in line with 21st-century standards. According to early versions, the state-run Nigerian National Petroleum Corporation (NNPC) would be stripped of regulatory powers and operated as a commercial entity. A new royalty and taxation regime for producers would mean more money for the treasury. Local ownership and production would be encouraged, environmental laws tightened, and communities in the delta – who mostly remain poor – would share in industry profits for the first time.
But despite repeated promises by successive governments and numerous revisions, the bill has not become law; its passage stalled by lobbying by interest groups trying to maintain the status quo or secure favourable terms.
The legal uncertainty has forced companies such as Total SA , Shell, Chevron Corp. and ExxonMobil to put billions of dollars of investment on hold, worrying for a country that relies on oil and gas for more than 80 per cent of revenues and 95 per cent of foreign currency earnings.
While Nigeria has reserves of about 37 billion barrels of oil, output has recovered to only the 2005 levels of 2.5 million barrels per day – far less than the 4 million barrels per day that the government had hoped to achieve by 2010.
Rival nations such as Angola are now pulling ahead in deepwater development, warns Ian Craig, who runs Shell's sub-Saharan Africa operations.
"It is not surprising then that investors currently hold back whilst the host nation ponders potential changes to the risk-reward equation," Mr. Craig told the Nigeria Oil and Gas conference last month, which was described by one delegate as "more downbeat that in previous years."
The slowdown in investment has increased pressure on the government to push through the bill and President Goodluck Jonathan has his own reasons for wanting it passed. He is eager to raise cash through a licensing round for marginal oil fields and needs the new laws in place to attract serious bidders. He also needs to deliver on his promises of reform, especially after the bungled attempt to remove fuel subsidies in January, which caused a nationwide strike and protests over the rotten state of the petroleum sector.
In response to the mass action, the government established four task forces to examine the oil industry, including one to draw up a fresh draft of the petroleum industry bill. Ngozi Okonjo-Iweala, Nigeria's finance minister, told the Financial Times in February that the bill would pass this year.
"The bill has become an albatross around the neck of the government, so I think it will go through," says Ronke Onadeko, an oil and gas consultant in Lagos. "The trouble is that we have no idea what it will look like because there are so many competing agendas."
The initial draft imposed higher royalty fees on deepwater production, more in line with global standards than the current generous terms. The multinationals, which wield considerable influence in Nigeria, lobbied hard against this as well as proposals for formalizing the loose joint venture operations with the loss-making NNPC. They succeeded in watering down the terms in subsequent versions of the bill. Elite politicians, eager not to lose control over the principal source of funds for patronage, corrupt businessmen and their allies in the industry, also fought to protect their interests.
The result is that the most recent draft of the bill is "beneficial to the oil companies, full of loopholes, terrible on disclosure and leaves a lot of discretion for the oil minister," says one oil consultant in Abuja, the capital.
"It's not inconceivable that this will be the basis for what goes through," the consultant says. "And if that happens the industry will not change in a major way."