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Nigeria warns oil block buyers could lose operating rights

By Tim Cocks

LAGOS (Reuters) - Nigeria's state oil company warned investors interested in three shallow water oil blocks offered for sale by Chevron that buyers may lose the right to operate them.

U.S.-based Chevron is selling minority stakes in joint ventures that operate five oil blocks. The majority owner is the Nigeria National Petroleum Corporation (NNPC).

Nigeria wants more direct ownership of its oil and gas through NNPC or local firms, leading several oil majors including Chevron to dispose of assets in Africa's top oil and gas producer.

NNPC published a notice in local newspapers on Thursday saying that there had been a "recent high level of interest shown by various investors in the ongoing divestment program for OMLs 52, 53 and 55 by Chevron Nigeria".

It reminded those considering investing that, although Chevron currently operates the blocks, the state oil firm has the right to take over the operatorship as majority shareholder. Chevron owns 40 percent of the blocks and NNPC 60 percent.

"Chevron shall cease to be the operator upon assignment of their participating interest," it said. "Therefore prospective buyers should note that automatic operatorship does not come with the acquisition of any of these blocks."

Not having operatorship poses significant risks for would be investors in the fields, not least that the NNPC's development subsidiary, NPDC, lacks the finance and expertise. It has usually had to call in a third-party operator anyway.

The notice seemed calculated to avoid messy tussles that ensued when Shell sold some oil blocks two years ago.

In that case, the buyers, including Poland's Kulczk Oil Ventures, UK-based Heritage Oil and independent energy firm Eland Oil , thought they had also purchased Shell's operatorship.

But NNPC, as majority owner, handed management of the fields to its subsidiary, saying it wanted to increase the amount of oil it produces and not give away rights to other companies.

Chevron's share of a total of five blocks it is selling amounts to reserves of 200 million to 250 million barrels of crude and condensate, two oil industry sources have said. At least some of the blocks are already producing.

Analysts say that when NNPC contracts out the operating of blocks, such a move is a potential avenue for corruption.

In May, for example, lawmakers probed contracts in which the NPDC gave two local firms with no previous operating experience lucrative deals to operate blocks that it lacked the capacity to run, with no competitive bidding.

Uncertainty surrounding the investment climate and rampant oil theft have shrunk Nigeria's production to below 2 million barrels per day. In recent months, oil exports from the OPEC member have been the lowest since 2009, when a militant rebellion was at its peak, according to central bank data.

(Editing by Joe Brock and Jane Baird)

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