President Muhammadu Buhari has directed state-owned Nigeria National Petroleum Corporation (NNPC) to take over oil blocks worth $2 billion from Royal Dutch Shell plc, in an area that’s at the heart of environmental and human rights controversies.
According to a letter dated March 1, 2019, seen by BusinessDay, President Buhari through the office of the Chief of Staff Abba Kyari directed NNPC and its upstream arm, Nigeria Petroleum Development Company (NPDC), to take over the operatorship of the entire Oil Mining Licence (OML) 11 not later than April 30, 2019 and also ensure smooth re-entry given the delicate situation in Ogoniland.
“NNPC/NPDC to confirm by 2 May 2019 of the assumption of the operatorship,” said the letter signed by Kyari.
OML 11 lies in the south-eastern Niger Delta and contains 33 oil and gas fields of which eight are producing as per 2017. In terms of production, it is one of the most important blocks in Nigeria as the terrain is swamp to the south with numerous rivers and creeks (Ogoniland).
Ogoni oilfield is one of the largest fields in Nigeria with about 140 oil wells with the capacity to produce over 100,000 barrels of crude oil per day.
Speaking to BusinessDay concerning the directive from the Presidency, Ademola Henry, team leader at Facility for Oil Sector Transformation (FOSTER II), said it might have made sense to transfer the assets, but again, the Ogoni issues have to be resolved before anyone is allowed to mine oil from the ground.
“It is interesting. The key is to ensure no conflict, ensure Nigeria gets the best deal possible and all decisions taken from an equity perspective,” Henry told BusinessDay.
OML 11 is operated under a Joint Venture Contract (JVC) with NNPC having 55 percent, Shell 30 percent, French oil company Elf 10 percent, and AGP 5 percent. The licence is due for renewal on June 30, 2019.
“What’s the Chief of Staff’s business with stuff like this? Where’s the Minister of State for Petroleum’s role here?” asked another stakeholder in the sector who chose not to be named.
When contacted by BusinessDay with inquiries regarding the current state of OML 11, Bamidele Odugbesan, media relations manager, Shell Nigeria, declined to comment on the matter.
In response to an SMS sent to his cell phone, Odugbesan simply replied, “No comment.”
In July 2018, sources told Bloomberg that Nigerian billionaire businessman and chairman of Heirs Holdings Limited, Tony Elumelu, was in talks with the Shell plc to buy the Nigerian oil assets in question.
According to the reports, Shell’s oil mining licences 11 and 17 might be sold for $2 billion. Also included in the deals are infrastructure assets such as a natural gas-fired power plant that would be managed by Transnational Corporation of Nigeria plc, another company in which Elumelu has major interest.
Shell discovered oil in the Niger Delta in the 1950s and became among the biggest producers in the West African nation. Tensions between the company and the local people broke out over the years regarding pollution and Shell’s contribution to civil society. The growing crisis shot to world attention when in 1995 a prominent protester and Shell critic, Ken Saro-Wiwa, a member of the Ogoni ethnic minority, was executed by the Nigerian government alongside eight others.
Shell’s Niger Delta operations have faced outside scrutiny. In 2011, a 260-page report by the United Nations Environment Programme (UNEP) said the company hadn’t applied its own procedures when operating in the delta and that environmental destruction was worse than previously thought, creating a “tragic legacy”.
Shell has continued to face opposition in the region, with some reports suggesting local people even blocked the company from accessing some parts of the delta for years.
Shell’s share of total production in Nigeria was 266,000 barrels of oil equivalent a day in 2017, compared with 258,000 barrels in 2016, according to its annual report. “Security issues, sabotage and crude oil theft in the Niger Delta continued to be significant challenges in 2017,” it said in the report.
Last year, Movement for the Survival of the Ogoni People (MOSOP) said Shell lacks the moral right to return to their land.
DIPO OLADEHINDE
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