Transfer of OML 11 to NPDC: Ogoni vows to resist resumption of crude, gas production

• Vested Interests Behind Transfer Of OML 11 To NPDC • Change In Ownership Illegal, Lack Due Process, Transparency- Stakeholders
• Niger Delta Weighing Options On Development- Loyibo • Move Threatens Investors’ Confidence – Olawuyi
• Presidency Mum, NNPC Denies Receiving Directive • Transfer On Track, Says Ex-NAPE President

The presidential directive to the Nigerian Petroleum Development Company Limited (NPDC) to takeover operation of the entire Oil Mining Lease (OML) 11 from Petroleum Development Company (SPDC) has been denounced by the Ogoni people.Professionals are also worried that the planned takeover from SPDC not later than April 30, 2019, blatantly undermines due process as stipulated by extant regulations, disregards the Ministry of Petroleum Resources, the board of Nigeria National Petroleum Corporation (NNPC), as well as other parties involved.

Consequently, the Ogoni people are warning that any attempt to resume crude oil and gas production using the takeover as a smokescreen, without addressing fundamental issues that led to the Ogoni struggle would be stoutly resisted. Other critical stakeholders, who equally see the development as an illegality that must be challenged in the law court say they smell a rat for such an order to be generated from the Office of the Chief of Staff to the President, as against the Ministry of Petroleum that has the statutory authority.

According to them, by overriding the board of the NNPC chaired by the Minister of State for Petroleum Resources, Ibe Kachikwu, they have validated the power play, which has reportedly prevents him from taking key decisions, consequently limiting the growth of the sector.

OML 11 is regarded as one of Nigeria’s most important oil assets, containing 33 oil and gas fields. Eight are reportedly producing. The lease is currently being operated by a Joint Venture of which the NNPC owns 55 per cent, Shell 30 per cent, Total 15 per cent, and Agip five per cent.

It is governed by a Joint Operating Agreement (JOA). Any JOA has two types of parties: The operator and non-operators. The operator is the leader of the consortium, as this is the person responsible for conducting the daily operations in the name of the consortium. For decisions to be made, the parties must jointly reach a consensus.

A memo signed by the Chief of Staff to the President, Abba Kyari, dated March 1, 2019 with reference number SH/COS/24/A/8540, directed the corporation to take over OML 11 from Shell.The letter 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 Ogoni Land.

“NNPC/NPDC to confirm by May 2, 2019 the assumption of the operatorship,” the memo stated.  The development is coming over two decades after the fields, which was turning out over 28, 000 barrels of oil per day were shut following the killing of Ken Saro Wiwa and others.

The former chairman of the Movement for Survival of the Ogoni People (MOSOP) Council, Prof. Ben Naanen, told The Guardian that some politically exposed persons who are trying to hijack the operation and eventually take up the concession of the Joint Venture partners represented by Shell were behind the presidential directive. Naanen recalled how he resisted pressure to support the transfer of OML 11 to NPDC as MOSOP’s provisional chairman, adding that the unfolding scenario may be the thin end of the wedge.

According to him, a number of Nigerian companies backed by some powerful political forces have been pressurising the government to use NPDC to grab OML 11, which he described as one of the most important oil blocks in Nigeria.“I think some people want to use NPDC as a front to hijack OML 11. That is the game we are seeing here. A number of Nigerian companies have quietly being pressurising the system. When I was chairman of provisional council, some interests wanted OML 11 to be given to NPDC and that is what is happening now. But we do know that these people wanted more by using NPDC as a front.”

Naanen explained that late President Umaru Yar’Adua’s directive that the NPDC should takeover oil fields in Ogoni Land, which is under OML 11 could not be implemented because of the intricate nature of the Joint venture agreement between international oil companies and the NNPC that represents the government.

“It is not that easy because of the geopolitics of the whole thing. Shell is Anglo-Dutch. In that same joint venture, you have Eni, which is Italian and Total French. These are the leaders of the European Union. I am afraid even the pronouncement by the President may not take immediate effect because if the joint venture partners decides to go to International Court of Arbitration, that is going to have its own impact. And besides, if you say you want to attract foreign investments and you wake one day and say you have taken over assets that is governed by all sorts of protocol and agreements, then what signal are you sending to the outside world. We have to try to avoid things that are contradictory.  There seems to be more complex situation at play.”

The don added that the lingering Ogoni conundrum has literally scared away many other investors who would have loved to invest in OML 11, and reiterated that Ogoni people were completely opposed to reopening the oil and gas fields without a systemic agreement on how the fields would be operated.

Naanen informed that last year, MOSOP and the Ogoni people set up a committee, which he heads, and which has been saddled with the task of drawing up a roadmap regarding the Ogoni position on the fields and OML 11.Similarly, the founder of Ogoni Solidarity Forum, Celestine Akpobari, said the presidential directive might also be informed by government’s perception that relationship between Ogoni people and Shell have become irreconcilable and if OML 11 is allowed to be in Shell’s name, it will remain a wasted asset. Hence, the decision of President Muhammdu Buhari to end that challenge once and for all.

Akpobari also disclosed that there have been speculations that the Presidency wants to remove licenses from private individuals and return oil blocks to government.If this were true, he said the government must bear in mind that oil business in Ogoni Land did not just shutdown, but was as a result of a struggle, which culminated in the death of Ken Saro-Wiwa and other Ogoni leaders. He urged the government to resist the temptation of resuming crude oil and gas production in Ogoni Land without first reviewing the tribunal trial of Saro-Wiwa and others, just as it should be willing to address the legitimate demands of the Ogoni people as contained in the Ogoni Bill of Rights.

“There are a lot of issues that the government needs to settle with the Ogoni people before we can talk of resumption of crude oil production. There is no way government will resume production in Ogoni Land without addressing the demands of the struggle. Ninety per cent of oil wells are domiciled in the Niger Delta and yet, these people that live here do not have oil wells,” he said.A Niger Delta leader, Mike Loyibo called for caution on the matter, adding that the region would carefully assess the development.

The Movement for the Survival of the Ogoni People (MOSOP) has already rejected the directive, stressing that the resumption of oil exploration in Ogoniland in the face of current pollution remained unacceptable.MOSOP’s President, Fegalo Nsuke said despite the severe impact oil exploration would bring to bear on the lives of Ogoni people, government was quick to take decisions on the region.

An international law professor, and the Executive Director of Institute for Oil, Gas, Energy, Environment and Suitability (OGEES), Prof. Damilola Olawuyi said the joint venture agreement provided room for NNPC to become the operator of the asset.He however, noted that the process of selecting who manages the asset could be decided based on extant regulations.“What is unclear is whether the decision for the NNPC to take over as operator was cooperatively arrived at by all the other JV partners or whether it is a unilateral decision of the Nigerian government. While the former will be less controversial, the latter could be opened to legal interpretation and challenge,” Olawuyi said.

He added that to avoid protracted legal disputes, it was important to ensure that fundamental changes to the terms of the joint venture proceed with the knowledge and consent of the JV partners. Olawuyi, global Vice Chairman of International Law Association (ILA) noted: “Typically, any of the partners in a JV can serve as the operator, while others provide financial and other contribution. There is therefore room for the NNPC to be designated as the operator of the OML 11 joint venture. What is however unclear is whether the decision for the NNPC to take over as operator was cooperatively arrived at by all the other JV partners or whether it is a unilateral decision of the Nigerian government. While the former will be less controversial, the latter could be opened to legal interpretation and challenge.

“So, it is important to proceed with caution and ensure that even if such changes are necessary and inevitable for strategic policy reasons, it should be done in line with proper due process,” Olawuyi stated.Knowing well that investors are holding back from the country and considering that Kachikwu had listed the field as one of those that were recently renewed to generate money for the country to fund her budget, Olawuyi said the sudden and unilateral change of operator without following procedures laid out in the JV arrangement may be viewed in the same light as yet another instance of the volatility of the Nigerian oil and gas market.

To him, this could further deflate investor confidence in the country’s oil and gas sector. “Also, coming immediately after the presidential elections, it could trigger uncertainty and cause investors to want to hold back from the country until they firmly understand the new directions of the government,” he stated.A source, who pleaded to be anonymous to save his relationship with players in the sector said the decision by the Presidency was totally wrong.

“My anonymous observation is simple. I am not sure, where the Chief of Staff derives the authority from, but it is the Ministry of Petroleum Resources that has the authority, not the COS to the President. It is an illegality in my opinion and should be challenged in court. It is also a strong arrogation of power on the part of the COS. I am not sure he has the authority legally,” the source said.He added that without effective industry governance reform, such situation would continue to crop up.

A leading in-country oil and gas lawyer, who pleaded to also remain anonymous added that the development has ridiculed the corporate governance of NNPC by overriding the board.“There is supposed to be a discussion around how operations will be transferred. This suggests that the government is ignoring the governance provision of the JOA by going ahead to make an order.

“The second point is that this development has ridiculed the corporate governance of NNPC. That decision should be an internal decision coming from the board of NNPC and put before NPDC. The implication is that the board governance does not matter.  That is the problem,” the source noted.
    
Maintaining that the transparency expected from the process is equally undermined, he expressed worries that the current government lacks respect for contractual relationship in the JOA, as well as corporate governance.The source said: “Even if you look at the NNPC Act, it doesn’t grant power such as this to the President. It grants those powers to the board and allows the President to appoint the board. The President’s influence should come through the board, and not by way of a directive, which ignored the board.”

Similarly, the Chief Executive Officer, Mudiame International Limited, Sunny Eromosele, said the development could create a backlash of breach of contract litigation.The oil and gas expert added that the growing decline in investment inflow into the country would worsen, as the situation would affect investors’ confidence.He said the development could finally cripple the economy, adding that there were looming challenges for the oil and gas sector in the country.

For former President, Nigerian Association of Petroleum Explorationists (NAPE), Abiodun Adesanya, there were no issues with directive other than funding capacity by NPDC.“SPDC has already relinquished the block and this recommendation to transfer the block to NPDC was made a while ago. The President just took the decision to approve the recommendation. In between this period, there were numerous discussions for other entities to acquire Shell, Total and Eni’s combined 45 per cent equity. What is yet to be seen is if any of the aspiring entities would come back to partner with NPDC to operate the block.

“I really don’t see any issue other than funding capacity by NPDC. This is why strategic partnership with NPDC may be the way to go,” Adesanya noted.When contacted, Senior Special Assistant to the President on Media and Publicty, Garba Shehu, simply told The Guardian, “Please speak to the NNPC.”Email sent to the Special Adviser on Media and Publicity to President Muhammadu Buhari, Femi Adesina on the issue was equally not responded to before this reported was filed.When The Guardian contacted the NNPC’s spokesperson, Ndu Ughamadu, he simply said he has not sighted the letter.