As House of Representatives Probes OPL 245…


Oil Prospecting Lease (OPL) 245 was one of the oil blocks awarded to Nigerians by the administration of the late General Sani Abacha. After the initial revocation and restoration of the block to Malabu Oil and Gas Company (MOGC) by former President Olusegun Obasanjo’s administration, Ejiofor Alike examines successive administrations’ interest in singling out only the oil block for endless probes

During the administration of the late General Sani Abacha, many oil blocks were awarded to Nigerian companies and individuals. One of such acreages was Oil Prospecting Lease (OPL) 245 awarded in 1998 to Malabu Oil and Gas Company (MOGC), believed to be owned by Abacha’s Minister of Petroleum and Natural Resources, Mr. Dan Etete.

OPL 245 is a deepwater acreage estimated to contain over one billion barrels of oil.

After it was awarded the block, Malabu had entered into a binding Joint Operating Agreement (JOA) with Shell Nigeria Ultra Deep Limited (SNUD) to exploit the block with SNUD as technical partner to the venture.

Revocation by Obasanjo

As Malabu and Shell were working on the licence area, the block was revoked by the administration of President Olusegun Obasanjo in 2001and re-allocated to SNUD in 2002 under a Production Sharing Contract (PSC) arrangement.

The re-award of the block to Shell had raised concerns as it was alleged that Shell might have worked against Malabu’s interest to engineer the revocation, having worked as the technical partner to Malabu and discovered the huge potentials in the block.

However, some key actors in Obasanjo’s administration were also alleged to have facilitated the revocation after Malabu allegedly turned down their request to clinch a stake in the plum asset.

Be that as it may, it was curious that OPL 245 was the only block awarded by the Abacha regime, which was revoked on the ground that it did not follow due process, while the other blocks awarded by the same regime strangely followed due process.

Angered by the revocation, Malabu had petitioned the House of Representatives Committee on Petroleum and after a public hearing, the House recommended that the block be restored to Malabu.

As the House intervention was ongoing, Malabu also sued the federal government and Shell at the Federal High Court in Suit No FHC/ABJ/CS/420/2003 claiming several declaratory reliefs.

However, the court struck out the suit but on appeal, the parties were said to have entered into a settlement dated November 30, 2006, which were executed by Obasanjo’s Attorney General and Minister of Justice, Chief Bayo Ojo (SAN).

Return of Block to Malabu

In accordance with the terms of settlement, former President Obasanjo in 2006, rescinded his earlier revocation and restored the block to Malabu via a letter signed by the then Minister of State for Energy and the current Amanyanabo of Nembe Kingdom in Bayelsa State, His Majesty, King Edmund Daukoru.

Also, in the said letter of restoration to Malabu, Chief Ojo was said to have emphasised that no further adjudication on the matter would be entertained.

While Shell was said to have been offered another block as compensation by the federal government, Malabu was also directed to pay the federal government about $200 million as signature bonus within 12 months.

Unfortunately, Shell was said to have spent over $500million to ‘de-risk’ the block and had also discovered oil in commercial quantity, having worked as the Production Sharing Contractor to the federal government.

Having spent such huge resources under the arrangement it had with the federal government, it was not surprising that Shell became aggrieved over the revocation by the Obasanjo’s regime.

Consequently, the oil giant was said to have commenced Arbitration proceedings at the International Centre for Settlement of Investment Disputes (ICSID) claiming over $2 billion from the federal government for breach of contract, loss of investment and special damages.

Intervention of Jonathan’s Administration

It was at this stage that the former President Goodluck Jonathan inherited the protracted dispute between Shell and Malabu over the ownership of the block.

By the terms of the settlement brokered by the administration of former President Jonathan, about $1,092,040 was paid by Shell Nigeria Exploration and Production Company Nigeria Limited (SNEPCO) and Nigeria Agip Exploration Limited (NAE) into an escrow account to settle Malabu Oil and Gas, to enable Shell take over the block from the Nigerian firm.

Giving the account of the OPL 245 dispute in a recent letter to the Vice President, Prof. Yemi Osinbajo, the former Attorney General and Minister of Justice under President Jonathan’s administration, Mr. Mohammed Adoke, stated that it was in the face of the arbitration proceedings instituted by Shell that he “encouraged a definitive resolution between the parties who themselves had expressed an intention to settle but were untrusting of each other, given their antecedents.”

According to Adoke, the title on OPL 245 at the date of settlement by the Obasanjo’s regime in 2006 and the Resolution Agreement in 2011 vested exclusively in Malabu subject only to the terms and conditions in the allocation.

Adoke argued that the interest of the federal government at the time of resolution in 2011 was to ensure the payment of the signature bonus on the block and that the block was developed to enable the country earn revenue through royalty and taxes.

He also maintained that consistent with Nigerian law governing oil and gas and the allocation of oil blocks, the signature bonus due and payable to the federal government amounting to $210 million was duly paid and acknowledged.

“The taxes and royalties associated with oil produced from the block are also now being paid. This is contrary to the lies and misinformation being peddled that Nigeria was short changed in the transaction,” he added.

Adoke also informed the vice president that any responsible Attorney General of the Federation would have done what he did to safeguard the interest of the country and avoid a liability that potentially stood against the country.

N’Assembly’s Current Probe

Despite what seems like the best effort of the Jonathan’s administration to settle the protracted dispute out-of-court, the House of Representatives under the current administration of President Muhammadu Buhari recently set up an ad hoc committee to investigate what the lawmakers described as alleged corruption, malpractices and breach of due process in the award of OPL 245.

The seventh House of Representatives under President Jonathan had conducted similar investigation but did not present their report, apparently due to the resolution of the matter by the Jonathan’s administration.

Operators in the sector have described as strange, the current decision of the 8th House to re-open investigation into an oil block awarded in 1998, which has been resolved after several litigations in Nigerian courts, as well as international arbitration.

At the beginning of the investigative session, the Nigerian National Petroleum Corporation (NNPC), AA Oil and Gas and Malabu Oil had shunned the committee.

Also a former Attorney General of the Federation and Minister of Justice, Chief Richard Akinjide (SAN), had written to the committee on behalf of Shell insisting that the House had no power to investigate the matter.

According to some oil and gas operators, the lawmakers are insisting that the $1.1 billion paid by Shell and Agip for OPL 245 was meant for the federal government, when it is a common knowledge that the only entitlement of the federal government in the award of oil block is signature bonus, while the beneficiary of the award (in this case, Malabu) is entitled to the full value of the block ($1.1 billion) if it divests its stake.