An oil block deal between Shell Petroleum Development Company (SPDC) and Malabu Oil & Gas, is currently raising questions about the affirmative action plan of the Federal Government to create active participation of local Nigerian businesses in the country’s lucrative oil and gas industry.
The deal involves the complete transfer of ownership of the long standing but highly contentious Oil Prospecting License (OPL) 245, which documents seen by Business Day, suggest could be Nigeria ’s biggest oil block, as it is believed to be holding an estimated 9.23 billion barrels of crude oil, to Royal Dutch Shell (an international oil company).
Oil Prospecting License (OPL) 245, located in Nigeria ’s offshore, went into operation in 2000, but immediately became a battleground for both Malabu and Shell when Shell, in 2002, got the government of Olusegun Obasanjo to evict Malabu from the acreage and remained its operator for four years.
Malabu was founded around 1997/98 by then Petroleum Minister, Dan Etete,(1995-1998) and had secured the concession in 1998, following which Shell became a minority partner. The concession was made to Malabu under a programme designed to get indigenous businesses and people involved in the lucrative Nigerian oil industry.
After lengthy counter litigations and arbitrations, as well as political scheming, Shell (with Agip as its partner) is believed to have offered Malabu $1.3 billion for the entire OPL 245, in early July, an offer, which Dan Etete and his Malabu appear to have accepted.
Business Day learnt that Shell and Malabu signed a Memorandum of Understanding (MoU) and that the agreement is now with the Department of Petroleum Resources (DPR), an agency of the Petroleum Resources Ministry, headed by Diezani Alison-Madueke, who has publicly declared her support for stronger indigenous participation in the oil and gas industry.
Industry sources say Dan Etete now appears to have been exhausted by the lengthy controversy over OPL245 and may now be interested in cutting his losses and running. At $1.3 billion, analysts say that is a handsome amount, considering what had been paid originally for the license.
But the greater concern, Business Day has learnt, is the threat that an approval of the transfer of such a lucrative license, secured under an indigenisation programme, to an international oil company, poses to the essence of the programme. Many say they know Dan Etete to be a friend of President Goodluck Jonathan, and that he may be counting on this relationship to get the needed approvals, a move many are watching to see if it will happen.
In the mid-to late 1990s, government had moved to encourage indigenous participation in the oil industry, dominated by international oil companies (IOCs). This policy saw the entrance of firms owned by Nigerian billionaires such as the late MKO Abiola, Mike Adenuga Jr., among others,with a number of unexploited marginal oil fields concessions being handed to them.
Malabu got its license under this indigenization programme and its production sharing contract stipulated that 40 percent of its acreage has to be owned by a Nigerian company. OPL 245 was awarded under the indigenisation programme.
Oil industry analysts, however, say the Shell-Malabu deal will not come easy, if at all. For instance, to transfer the block will mean drafting a new contract. One analyst even said: “Under the arrangement that we have seen, NNPC [Nigerian National Petroleum Corporation] is not going to be involved in the operations of potentially Nigeria ’s biggest oil field.”
The deal also goes counter to Diezani Alison-Madueke’s call for the nationalisation of Nigeria ’s oil resources. Besides, should the National Assembly put on its patriotic hat, it might see this deal as trading off a lucrative Nigerian asset and seek to intervene.
Shell’s former Africa vice president for exploration and production at the time, Ann Pickard, had vigorously pursued government in arbitration in 2007, seeking $500 million in damages and interest at the International Centre for the Settlement of Investment Disputes (a wing of the World Bank). Now, it appears, Pickard’s successor, Ian Craig, has changed strategy in dealing with the government, especially with the knowledge that Dan Etete is friend to President Jonathan.
While Shell operated the bloc, it had drilled two wells in 2005, Etam 1 and 2. It identified about 1,08 billion barrels of probable reserves and Shell has always maintained that the bloc has between one and three billion barrels in probable reserves. But a detailed 2007 study carried out by Ikon Sciences, a geophysical consultancy, shows the total probable reserves to be around 9.23 billion barrels.
