The latest unilateral order from President Muhammadu Buhari to the Nigerian National Petroleum Corporation (NNPC) to take over the operatorship of the entire Oil Mining Lease 11 from Shell Petroleum Development Company may end up in a legal battle that will compound the fortunes of the oil field sooner than later.
This was the reaction of a Lagos based energy litigation lawyer in an interview with Business Hilights on Thursday.
OML 11 lies in the southeastern 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.
The terrain is swampy to the south with numerous rivers and creeks. Port Harcourt is located in the northwest of the block, while the major yard and logistics base at Onne is located by the Bonny River. The Bonny oil terminal – the largest in Nigeria – and Nigeria LNG (NLNG) are both located at Bonny.
A memo from the presidency to the Group Managing Director of 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, had directed that the entire operatorship of OML 11 should be taken over by the NNPC/Nigeria Petroleum Development Company 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.”
Whereas none of the media officers at the NNPC and Shell agreed to make comment on the development, Dr Lawrence Abiodun, a Lagos based energy lawyer told our correspondent 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.
“This is a clear case of official interference in an established business agreement that needs to be contested in a competent court of summary jurisdiction.
“With this type of political bottlenecks in oil and gas industry, investors both local and international will continue to see Nigeria as a no go area in deep pocket investments.
“Recall that Shell had not made any comment on the development and means a lot considering the provision of the MoU signed at the time of leasing out the OML 11.
He argued that Shell may seek and get redress either in a Nigerian court or a UK court if it deems it fit which I know must come up in a matter of time.
Details from the Federal Ministry of Petroleum Resources in Abuja revealed that there were four partners in the OML 11 joint venture.
Analysts say granted that four parties are involved in the JV, operatorship can move among the parties provided it is covered in the JV MoU and whoever that operates it shall be doing so on behalf of others. And whoever runs the asset will account to the partners when it comes to the sharing table.
An example to such outplay is seen in the developments at some deep water projects especially the OPL 245. The Zabazaba for instance, is operated by Agip but Shell has 50 per cent stake in it.
Observers say if tomorrow Agip says it does not want to operate the asset anymore and asks Shell to come and operate it, that won’t change anything. Rather it is only the operatorship that will change.”
Originally, the NNPC owns 55 per cent shares in the OML 11 partnership, while Shell, Total and Agip own 30, 15 and five per cent respectively in the joint venture.
However, there are strong indications that the operatorship of the asset, based on the latest directive of the President, had moved from Shell to NPDC, the flagship oil exploration and production subsidiary of the NNPC.
Experts are upbeat that the NPDC had the capacity to manage the field after all.
