631 views | Ifeanyi Izeze | March 26, 2019
As disclosed in a leaked memo from the State House, Abuja, to the Group Managing Director of Nigerian National Petroleum Corporation (NNPC), dated March 1, 2019, with reference number SH/COS/24/A/8540 and signed by the Chief of Staff to the President, Abba Kyari, the nation’s apex oil concern through its upstream subsidiary Nigerian Petroleum Development Company (NPDC) was ordered to take over the entire operatorship of the crisis-ridden Oil Mining Lease (OML) 11 not later than April 30, 2019.
The memo with title; ‘Operatorship of Entire Oil Mining Lease 11,’ read in part, “Kindly note that the President has directed NNPC/NPDC to take over the operatorship, from Shell Petroleum Development Company, of the entire OML 11 not later than 30 April 2019, and ensure smooth re-entry given the delicate situation in Ogoniland.”
The presidency further averred in the memo that the President has “directed NNPC/NPDC to confirm by 2 May 2019, of the assumption of the operatorship.”
To some people, the above memo may simply be taken on the surface as mere administrative procedure but to those who know, it is far beyond that. Rather it’s a subtle declaration of a force majeure in the area called OML 11 particularly Ogoniland. And whatever next on this matter will be very interesting to see.
OML 11 lies in the south-eastern Niger Delta and contains 33 oil and gas fields of which eight are producing as at 2017. In terms of production, it is one of the most important onshore blocs in Nigeria. People don’t understand the scope of OML 11. They think OML 11 is just Ogoniland. No, that’s just a fraction of it.
In the Ogoni area of the acreage, Shell has 98 oil wells in about nine oilfields. The company also has five flowstations in Bodo West, Bomu, Yorla, Korokoro and Ebubu. Daily output from the area, according to Shell statistics, was at 28, 000 barrels per day before the shut-in in 1993 after the killing of Ken Saro Wiwa et al though the Movement for the Survival of Ogoni People, the umbrella Ogoni rights group had alleged that the AngloDutch giant was pumping from the area far above three times what they were declaring to the federal government.
First, the letter by the president’s chief of staff is strewed with so much impunity as it fails to take into cognizance the history of the oilfields in OML 11 particularly the Ogoni section of it which covers a tangible portion of the entire areal extent of the acreage.
Except the Presidency is declaring a force majeure in the area, the order conveyed by Kyari’s memo deliberately failed to consider the roles and relationship between key stakeholders like Shell, government and the Ogoni community. Such oversight will definitely render the entire question of successful re-entry and resumption of oil production in the area in a month’s time impossible as it will be unacceptable and outrightly resisted by the Ogoni people and even Shell and other joint venture partners in the ownership of the bloc. Mark my word!
Aside the thorny issue of Ogoni clean-up and rehabilitation, the latest unilateral order from President Buhari to the NNPC to take over the operatorship of OML 11 from Shell may end up in a legal battle that will compound the misfortunes of the oil fields in the acreage sooner than later.
Anybody who downplays the seriousness of the community issues involved in resumption of oil production in the acreage particularly the Ogoni section of it is only deceiving himself and that would be a costly miscalculation. Recall that since 2012, NPDC has unofficially had the operatorship of the Ogoni oilfields under the Joint Venture Agreement. So, this new announcement aside that it smacks of a forceful re-entry actually makes no difference. The question would have been why was NPDC unable to enter Ogoni since 2012?
The one thing that is unclear about the unilateral decision of the President to remove operatorship of OML 11 from Shell and grant it to NNPC/NPDC, is whether he did so in consideration of Shell’s ongoing moves to divest its equity in the asset after it had been renewed or whether the decision was due to pressure by the NNPC to grab the lucrative bloc which remains one of the nation’s most prolific onshore acreage.
Could it be that Buhari was unaware of Shell’s proposed divestiture, but was convinced the AngloDutch major wasn’t doing much with the asset because of the challenges it has operating in Ogoniland, which occupies a tangible portion of the bloc?
It would be recalled that the renewal of the licenses of 14 out of the 15 Shell-operated acreages, whose licenses expired was completed with a fiat while that of OML 11 was kept on hold because as said by the DPR, it is larger than the maximum areal size allowed for a Mining Lease in the DPR’s current regulation. The acreage in its current form covers about 2,800sq kilometres and the DPR had set out to divide it into three blocs
Surprisingly, the DPR was still working on splitting the acreage into three when this memo signed by Abba Kyari, President Buhari’s Chief of Staff, surfaced, instructing NNPC/NPDC to confirm by May 2, 2019, that they have taken over operatorship of the entire OML 11.
Curiously, top officials of DPR claimed that they received the news of the change of operatorship just like the rest of us: via a grainy, scanned letter on the social media on Thursday, March 14, 2019.
We should seriously be concerned that Shell up till today has not made any statement on the announced withdrawal of its operatorship of OML 11 and that means a lot considering the provision of the MoU signed at the time of leasing out the oil bloc and assigning Shell the operatorship. Obviously, from Shell’s deportment, the decision of the Presidency may have been unilateral without carrying other stakeholders in the acreage along.
The joint venture partners in OML 11 are not just NNPC and Shell. By the original setting, the NNPC owns 55 per cent shares in the OML 11 partnership, while Shell, Total and Agip own 30, 15 and 5 per cent respectively in the joint venture.
Does it occur to the Chief of Staff that such presidential intervention may be subject to litigation as there may not be any provision in the MoU between Shell, NNPC and other parties for such hostile takeover?
Has Shell actually in spirit and truth divested (hands-off) its interests in OML 11 covering the Ogoni area of Rivers State? This is a very crucial issue because there are so many things that are not very clear in the present rush by the NNPC upstream subsidiary, NPDC to takeover Shell’s operatorship of the acreage towards restarting oil exploration and production in the controversial area. Now, did the government say it was taking over the operatorship of the oil bloc because Shell couldn’t operate it? Of course not! We need to hear from Shell.
The federal government also must put its reasons for the change of operatorship on the table and it must be established that due process has been followed. There must be some procedures in taking over the operatorship of such asset, so, were they followed or Abba Kyari’s executive order overrides any other thing?
The reasons behind this decision need to be clearly stated and put in the public domain to avoid misinformation or to avoid people misconstruing the intention of the government an its agencies.
If the federal government actually ordered Shell to relinquish its operational rights in Ogoni oil fields to a new operator (which now seems to be NPDC), how is the government going to get Shell to pay its counterpart funding for the clean-up and remediation exercise as proposed by the United Nations Environmental Programme for the Ogoni area? Is the NPDC as the new operator going to inherit only the assets of Shell in the oil concession without the accompanying liabilities or will inherit both? Would the NPDC agree or rather be able to raise such money for the cleanup?
Shell has serious obligations assigned to it in the UNEP-sponsored Ogoni clean-up and remediation exercise and if the company is allowed to hands-off the acreage now, the entire effort by both the federal government and UNEP at cleaning the massive oil spillage in the area would definitely run into a hitch if not total crashing. This is the truth!
IFEANYI IZEZE: email@example.com