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Another Murky Oil Deal

14 Jan 2013

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BEHIND THE FIGURES By Ijeoma Nwogwugwu; ijeoma.nwogwugwu@thisdaylive.com

Shell Nigeria is in the news again for the wrong reasons. But Shell is not alone. Shell and its multinational partners – Italy’s Eni, which operates locally as Nigeria Agip Oil Company, and Total of France – are certain to come under scrutiny over the $850 million sale of a 45 per cent stake in an onshore oil concession located in the western Niger Delta to a British oil company Heritage Oil alongside its local partner Shoreline Energy International, a subsidiary of Shoreline Power.


Except for a few in the oil and gas industry who might have taken note, the sale last November of Oil Mining Lease (OML) 30 to Heritage Oil literarily went unnoticed. The completion of the deal was announced with minimal fanfare and got limited coverage in the local press. Not much was made of the deal, until last week when the London-based Financial Times (FT) wrote an innocuous story on the promoters behind the deal.


It turned out that Heritage Oil, a FTSE 250 company, is chiefly owned and run by Tony Buckingham, a British national with a past bound to raise the hackles of a few African governments. His Nigerian partner, Kola Karim, emerged on the scene some years back following his acquisition of construction firm Costain West Africa Plc and Nigerian Ropes Plc, both quoted companies on the Nigerian Stock Exchange.


Before closing the deal on OML 30 late last year, Shell and its partners had tried to dispose of the same block along with three other oil assets between 2010 and 2011. At the time, the tenders generated a lot of interest, as a lot of Nigerian companies and their foreign partners had lined up in droves to acquire OMLs 30, 34, 40 and 42, which had been put on the block.


But the asset sales encountered some speed bumps after the Nigerian National Petroleum Corporation, which has controlling interest of 55 per cent in each of the blocks, insisted on enforcing its right to operatorship as provided under the Joint Operating Agreement (JOA) covering the concessions. NNPC’s position was reinforced in June 2011 by the petroleum minister, Diezani Alison-Madueke, when she isolated OMLs 30 and 34, stating both blocks held some of the country’s largest gas fields which were important to the country’s power infrastructure programme, and too strategic to be handed over to “certain” operators.


But what the minister forgot to add was that OML 30, in particular, is one of Nigeria’s most prolific onshore oil blocks with extensive oil and gas infrastructure in the western Niger Delta. Production from the block was started in the 60s and attained a peak rate of 280,000 barrels per day in 1973. With rising militancy in the region and funding issues, production had declined sharply to 40,000 barrels per day, though the block still held proven and recoverable of 1.5 billion barrels at the time of its sale in 2010.


NNPC and the minister’s position on the sale of the blocks proved to be a deal breaker for Conoil Plc, belonging to telecoms, real estate and oil and gas business mogul, Dr. Mike Adenuga. Conoil had offered $1.29 billion for OML 30, having been assured that Shell would transfer operatorship to it. Conoil, which defeated African Petroleum Plc (now Forte Oil Plc) and Oando for the oil field, had gone as far as making overtures to the federal government and petroleum ministry seeking to operate OML 30 for five years, after which operatorship would revert to NNPC’s exploration and production subsidiary Nigerian Petroleum Development Company (NPDC).


In compliance with the tender rules for the block, Adenuga had parted with a non-refundable deposit of 10 per cent of the bid sum and stood the risk of losing $129 million if Conoil withdrew its bid. But on realising that NNPC and the ministry were unbending on the transfer of operatorship to Conoil, its financiers, led by Standard Chartered Bank, balked at banking rolling the acquisition of the block. Conoil was eventually forced to walk away from the deal but not until after Adenuga had compelled Shell to refund most of the $129 million deposited for OML 30.


Given its strategic importance, it is rather curious that NNPC and the ministry, which held on tenaciously to the terms of the JOA when Conoil wanted to acquire OML 30, approved the sale of the same block to Heritage Oil owned by a Briton with a questionable past. Buckingham, in case it has escaped the attention of the Nigerian government, is widely recognised in the UK as the FTSE 250's most famous former mercenary, a tag, the FT wrote, he predictably deplores.


The 59-year-old is believed to be a former member of the Special Boat Service, who entered the oil business in 1972 as a North Sea diver, before becoming a concession negotiator in the 1980s for Ranger Oil and Premier Oil. By 1989, he had become an adviser to the government of Angola and assisted its oil ministry in establishing an exploration and production company.


Three years later, Buckingham formed Heritage Oil, formerly HOC, to hold oil and gas exploration interests in offshore Angola. Along with Ranger, HOC owned half of a company called ROWAL, which in 1993 was forced to abandon its Angolan oil fields and drilling equipment after part of the country was overrun by UNITA rebels.


To regain the equipment, Buckingham did a deal with former South African Apartheid-era operatives/mercenaries Eeben Barlow, Lafras Luitingh and Simon Mann, the one-time Scots Guard who subsequently gained notoriety for leading the Wonga Coup in the oil-rich Equatorial Guinea. The coup d’etat was targeted at overthrowing the country’s president, Teodoro Obiang, and installing opposition leader, Severo Moto, in exchange for unrestricted access to the country’s oil riches.


Prior to the Wonga Coup, Buckingham was alleged to have supplied mercenaries to governments in Angola and Sierra Leone, in their respective bids to decimate the rebel militia groups that were trying to overthrow the governments of both countries. Although Buckingham was never linked to the attempted coup and has denied involvement, others linked to the attempt to overthrow Obiang included Mark Thatcher, son of former British prime minister, Margaret Thatcher, and Eli Calil, a British of Lebanese origin, who is believed to have illegally banked money for the late General Sani Abacha.


Attempts to get Shell to respond to this newspaper’s enquiries at the weekend to ascertain if the oil multinational had conducted a due diligence on the owners of Heritage Oil and if a full disclosure on Buckingham was made to the Nigerian government hit a brick wall. All the Anglo-Dutch multinational was willing to concede was that it had adhered to the relevant laws in the sale of OML 30. But Shell’s position simply does not hold water.


In the last decade or so, Nigeria has had enough problems contending with a homegrown militia and oil thieves in the Niger Delta. The last thing it needs is someone with a past like Buckingham’s that could still pose a security risk. In more advanced economies, the sale of such so-called strategic assets would have been subjected to thorough scrutiny and not handed over to a man whose companies have supplied arms and mercenaries to African despots. And Shell, having suffered the most losses in the hands of militants in the Niger Delta, should have known better than to close the deal with Heritage Oil.


Well, it behoves the legislature and federal government to wade into yet another murky oil transaction and shield the Niger Delta from a man with a less than salubrious past.

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