Can anyone fix the Nigerian oil industry?

If you want to find a poster child for the idea of the resource curse, you don’t have to look much further than Nigeria: A country whose endemic corruption, driven by the largest oil industry in Africa, is the stuff of legend. Nigeria and Nigerian oil, however, are at a crossroads: The country’s lawmakers are on the home stretch of an ambitious effort to remake — for better or worse — the whole industry.

William Wallis at the Financial Times reports that Abuja is making a serious push — legislators are taking the unheard-of-in-Washington measure of delaying their August recess — to pass the Petroleum Industry Bill (PIB), which would restructure the national oil company, raise royalties on foreign oil companies operating in Nigeria, and encourage local Nigerian oil operators to play a larger role in the country’s oil and gas industry, the largest in Africa. The stakes for the PIB are high, reviving an oil reform effort that had stalled for years and coming with national elections on the horizon in January 2011. But Diezani Allison-Madueke, Nigeria’s oil minister, told Reuters in late July that she is confident that the bill will pass the National Assembly by the end of August.

It’s an ambitious effort for a country whose oilfields have been plagued by state mismanagement for decades. Even though it has the largest oil reserves in Africa, Nigeria produces only about half of its target rate of 4 million barrels per day. Three of its four refineries are out of service, leaving the country to import 85 percent of oil and gas products for domestic consumption. Its principal onshore oil-producing region, the Niger Delta, has been mired in a petroleum-fueled guerrilla war (above) for the better part of two decades. Last month, the country’s finance minister declared the state-owned Nigerian National Petroleum Corp. (NNPC) insolvent, with a debt burden of $6.6 billion.

The PIB’s reforms start with the troubled national oil company, breaking up the NNPC — which has never had much luck drumming up investment or project funding — into a series of smaller profit-driven companies, which in turn would be able to access international bond markets for much-needed capital.

But as it prepares to decentralize the NNPC, Abuja wants to increase its leverage vis-à-vis the international oil companies operating the country’s leases, according to a Reuters report. The PIB includes higher royalties for some deepwater fields and imposes royalty payments on others that were previously exempt from royalty payments. Because deepwater fields require the most technical expertise, the government is targeting the areas where the investment and cash flow for the foreign oil companies is expected to be the strongest.

At the same time, the bill seeks to encourage greater indigenous participation in the oil industry, lowering royalties on onshore fields to bring Nigerian exploration companies to invest in smaller, undeveloped fields. It also stipulates that at least half of future crude output be refined within Nigeria.

Since taking office in May, Nigerian President Goodluck Jonathan has been juggling internal reform initiatives with efforts to prevent a return of rebel violence to the Niger Delta. His government has made some efforts to improve transparency and root out corruption, so it’s no surprise that the PIB contains provisions that would make all contracts and revenue payments to the NNPC and the Nigerian government publicly accessible. With elections looming in January, the PIB, if it passes, would be a major feather in his cap. Meeting in Washington last Thursday, Secretary of State Hillary Clinton and Foreign Minister Henry Odein Ajumagobia announced the creation of a U.S.-Nigeria binational commission to promote, among other things, "good governance and transparency" and "energy reform and investment."