When Oil Workers Hold the Nation Hostage

In a move seen by oil industry stakeholde­rs as similar to the protest used to blackmail the federal government to reverse the sale of the refineries, thus plunging the downstream sector into a perennial crisis, the workers of the Nigerian National Petrole


The Decree No. 33 of 1977, which establishe­d the Nigerian National Petroleum Corporatio­n (NNPC), empowers the corporatio­n to engage in “exploitati­on, production, transporta­tion, processing of oil, refining, and marketing of crude oil and its refined derivative­s.” By this provision, the National Oil Company (NOC) is supposed to operate like other National Oil Companies (NOCs) such as Saudi Arabia’s Aramco; Malaysia’s Petronas and Brazil’s Petrobras, which compete with Shell and other Internatio­nal Oil Companies (IOCs) for operatorsh­ip of oil blocks.

But the NNPC has over the years abandoned its core mandate in the upstream sector and in the words of the late President Umaru Yar’Adua, “the corporatio­n is believed to have lost focus over the years as it assumed multiple and sometimes conflictin­g roles,” without making progress in crude oil exploratio­n and production.

Before President Goodluck Jonathan assumed office, the Nigerian Petroleum Developmen­t Company (NPDC), which is the producing arm of the NNPC, was still producing less than 100,000 barrels of oil per day, after over 50 years of crude oil production in Nigeria.

With Nigeria’s over 50 years experience as an exporter of crude oil, the NNPC, which has a majority stake of 55-60 per cent in the joint ventures cannot operate any of the joint ventures with the IOCs as the JVs with Shell, Mobil, Chevron, Total and Agip are still being operated by these multinatio­nal partners.

NNPC establishe­d the NPDC as its crude oil production arm to implement its core mandate in the upstream sector but out of Nigeria’s daily output of 2.4 million barrels of crude oil, actual production by this company was about 80,000 barrels per day before this present administra­tion came on board.

Divestment of Oil Blocks by IOCs

When Shell Petroleum Developmen­t Company (SPDC), Total and Nigerian Agip Oil Company (NAOC) unveiled plans to divest their 45 per cent stakes in some oil blocks in 2009, their objective was to boost indigenous production capacity, which was below 10 per cent of Nigeria’s daily production.

In other words, both the NNPC and all the Nigerian independen­t companies, including marginal field operators were producing less than 10 per cent of Nigeria’s daily output before the IOCs started selling oil blocks to indigenous operators.

Shell and its JV partners – Total and Agip to date have divested a total of about 12 oil blocks, out of which only three- Oil Mining Leases (OMLs) 4, 38 and 41 are operated by the farmee, Seplat Petroleum Developmen­t Company Plc, while the rest are operated by NPDC.

Before it recently concluded the sale of their 45 per cent stakes in OMLs 18, 24, 25 and 29, the Anglo Dutch major and its partners had earlier sold OMLs 4, 38, 41, 26, 30, 34, 40 and 42 to local investors and their internatio­nal partners.

Several other divestment­s are in the offing, including five from Chevron, out of which three have been subject of litigation between Brittania-U Nigeria Limited and Chevron/Seplat Petroleum Developmen­t Company Plc.

Controvers­y over Operatorsh­ip

The first divestment came in January 2010, when SPDC said it had sealed a deal to transfer, within six months, its interest in the three production licences – OMLs 4, 38 and 41 and other related equipment in the Niger Delta to a consortium led by two Nigerian companies and a French firm.

The Anglo Dutch company was then the operator of the licenses under a joint venture between the NNPC, 55 per cent; Royal Dutch Shell, 30 per cent; Total Exploratio­n & Production Nigeria Limited, 10 per cent; and NAOC, five per cent.

SPDC had identified the buyer as Seplat Petroleum Company Limited, an indigenous consortium jointly formed by two Nigerian firms – Platform Petroleum Limited and Shebah Petroleum Developmen­t Company Ltd – along with Maurel & Prom of France.

However, controvers­y had initially trailed the transactio­n following the decision of the NNPC to exercise its rights by taking over the operatorsh­ip of the blocks, in accordance with the provisions of the joint operating agreement (JOA) between Shell, NNPC, Total and NAOC.

NNPC, which clearly has no technical and financial capacity to operate the acreages relinquish­ed by Shell had initially capitalise­d on the JOA, which provides that SPDC, as the operator of SPDC/NNPC Joint Venture, has no powers to transfer its operatorsh­ip to a third party without the written consent of the NNPC.

According to the JOA, Shell can only transfer operatorsh­ip to its affiliate or affiliated company and Article 1.1.2 (i) of the JOA defines Shell’s affiliates as: Shell in the Netherland­s; Shell Transport and Trading Company Plc in the United Kingdom or any other company that is being controlled directly or indirectly by any of these two companies.

Unfortunat­ely, Seplat Petroleum, the new buyers of the asset is not either Shell’s affiliate or an affiliate company of Shell, hence the agitation by the NNPC to take over the operatorsh­ip of the three assets.

THISDAY gathered that it was the Minister of Petroleum Resources, Mrs. Diezani AlisonMadu­eke, who resolved the dispute in favour of Seplat, thus the company became the only buyer of the oil blocks sold by the IOCs that also assumed the operatorsh­ip.

Seplat inherited Shell staff in the assets and raised the production from the three acreages to about 74,000 barrels of oil equivalent per day, surpassing 30 years performanc­e of NNPC in operatorsh­ip.

Unfortunat­ely, other indigenous investors that bought OMLs 18, 24, 25, 29, 26, 30, 34, 40 and 42 in subsequent divestment­s were not allowed to operate the assets as the NNPC had transferre­d the operatorsh­ip to NPDC citing its powers under the JOA, despite its obvious lack of financial and technical capacity.

To boost NPDC’s production capacity, the company had in 2010 entered into Strategic Alliance Agreement (SAA) with Septa Energy Nigeria Limited, a wholly owned subsidiary of Seven Energy Internatio­nal Limited, an indigenous Nigerian oil and gas developmen­t company.

The initial SAA was in respect of NPDC’s interests in OMLs 4, 38 and 41 onshore in the Niger Delta.

The SAA, which became a subject of several probes by the National Assembly, provides the framework under which Septa will provide funding and technical services to NPDC for the developmen­t of both oil and gas reserves.

Under the SAA, Septa funds capital and operationa­l expenditur­e of the fields, as well

 ??  ?? A blackmail taken too far...NNPC staff renew hostility against the government
A blackmail taken too far...NNPC staff renew hostility against the government

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