An analysis by oil consultancy firm, Resources for Development, says oil giants Shell/Eni’s deal for the controversial OPL 245 included “unprecedented terms” which funded an alleged bribery scheme.

The analysis was commissioned by four non-governmental groups — Global Witness, HEDA, Re:Common and The Corner House — based on publicly available documents.

This included Shell and Eni’s valuations of the oil block, according to a statement released by the NGOs on Thursday.

Italian prosecutors allege that the $1.1 billion paid by Shell and Eni for the licence was used to pay Dan Etete, former minister of petroleum resources and “intended for payment to President Jonathan, members of the government, and other Nigerian public officials”.

They have denied the allegations, but the oil companies and some of their senior managers are now standing trial, charged with international corruption, with prosecution pending in other countries.

The analysis alleged that the deal included “unprecedented terms which funded an alleged bribery scheme.  The terms replicated military-rule era “Sole Risk” contracts, and boosted Shell and Eni’s internal valuations of the oil deal enough to justify the companies paying $1.1bn upfront”.

“The award of military era style contracts for deep water fields to huge international oil companies appears to unprecedented since the advent of civil government in Nigeria. The deal transferred massive economic benefits to the companies at the expense of the Nigerian people by giving away Nigeria’s right to its share of the oil produced, terms which resemble ‘Sole Risk’ contracts granted only to Nigerian companies during military rule in Nigeria’s Deep Water. The Nigerian Department of Petroleum Resources currently lists the OPL 245 license as a Sole Risk type contract in its annual report,” the statement further said.

“The analysis of Shell and Eni’s valuation documents prepared before they agreed the deal in 2011 appears to show that the transfer of Nigeria’s share of future revenue to the companies was essential for the companies to be willing to pay over a billion dollars upfront, money that prosecutors say was used to pay massive bribes.

“The analysis also found that the Nigerian state’s ability to buy their rights back was heavily restricted in the deal with Nigeria having to pay $650m plus interest up front to re-acquire a stake worth an estimated $2 billion in future revenue. These rights would still leave Nigeria with a far lower share of the oil production than recommended by the IMF, and 15% or $3.5bn lower than previous terms for the same license.”

An earlier analysis, published in late 2018 by the same firm, concluded that the terms of the contract could reduce the Nigerian government’s revenue from the fields by $5.86 billion over the lifetime of the project when compared to the standard production sharing contract (PSC) terms in place in Nigeria since 2005, “assuming an oil price of $70 per barrel”.

Emails between Shell managers at the time allegedly showed they were aware that the deal would not give Nigeria rights to the share of its oil that is usual in deals between country governments and international companies.

Barnaby Pace, a campaigner at Global Witness said: “We’ve known of allegations of vast bribery in this deal for years. Now we’ve learned that Shell and Eni profited unfairly through military era contract terms meaning that it was Nigeria’s share of oil that was used to fuel profiteering and payoffs. It is simply unacceptable that Shell and Eni should be allowed to hold on to this scandalous deal.”

“These companies and Nigerian officials agreed a sweetheart deal that deprives Nigeria of money it badly needs to build schools and pay doctors. PresidentBuhari should reject any deal that leaves the OPL 245 oil license with these companies,” Olanrewaju Suraju of HEDA said.

Nick Hildyard of The Corner House said Shell and Eni “represented their OPL 245 contract as a production sharing system yet it includes no sharing of production for Nigeria. This shockingly poor deal must be cancelled”.

“The Italian government is discouraging Nigerian migrants trying to reach Italy by claiming that it will help them at home, but Italy’s biggest multinational, part owned by the state, is accused of depriving the Nigerian people of billions. The OPL 245 scandal appears to show that Italians are not helping the poorest, but profiting from them,” said Antonio Tricarico of Re:Common

Shell, when asked for comment, stated that “in line with correct legal process, many of these issues will be considered by the court and we do not wish to interfere with those proceedings”.

Eni also said in light of their ongoing trial, Eni is “unable to disclose… information relevant for the pending proceedings, nor is it otherwise willing to publicly disclose data that are sensitive in nature.”

Five oil wells are currently on fire in Ondo, one of the oil-rich states in Nigeria.

TheCable gathered that a huge fire broke out in Ajegunle Ikorigho community on Thursday and affected parts of Ojumole which is located in Ikorigho land.

The oil wells affected in the incident are said to be Isan-West field, Parable field, Malu field, Ororo and Opokaba.

The fire also spread to Otumara, Ikorigho, Ajegunle-Ikorigho, Zion Ikorigho, Iluayo, Kendo Ayeren and Ehinmoghan-Ikorigho communities.

A source said the oil wells belong to Chevron Nigeria Limited but TheCable cannot independently verify this information.

The cause of the fire had not been ascertained as of press time.

Femi Joseph, spokesman of the Ondo state police command, told TheCable that he had not been briefed about the development.

Aiteo Eastern Exploration & Production Company Limited has declared force majeure on the Nembe Creek Trunk Line (NCTL) after a fire outbreak was discovered on a section of the pipeline on Sunday.

Force majeure is an unexpected event which prevents someone or a company from doing something that is written in a legal agreement.

The NCTL, located in Rivers state, is 100-kilometre long pipeline that transports up to 150,000 barrels per day (bpd) of the Bonny Light crude out of the country through the Bonny Crude Oil Export Terminal operated by Shell Petroleum Development Company (SPDC).

In a statement, Ndiana Mathew, a spokesman for Aiteo, said initial investigations revealed that the fire occurred as a result of an “illegitimate breach”.

The company said the fire had been contained and all operations into the pipeline have been shut based on recommendations.

“We have been informed of a fire outbreak by our surveillance team comprising the JTF, FSS around NCTL RoW near Awoba  today, 21 April 2019,” the statement read.

“Our Operations Emergency Response team was immediately activated and following its urgent intervention and containment action, we are constrained to shut in injection as well as other related operations into the NCTL.  In accordance with standard procedure, we requested the other injectors to do same.

“The NCTL has, hitherto, enjoyed smooth operations preceding this incident founding suspicion that this fire may have occurred through an illegitimate, third party breach of the functionality of the pipeline, critical national asset.

“In the meantime,  the relevant investigations are continuing while further information about the remote and direct causes of the fire will be communicated as soon as these become available.  We ask our stakeholders to await further, detailed briefing in due course.”

The NCTL shutdown is the second in two months as operations only resumed on March 7 following the plugging of a leak which necessitated the shutdown of the facility on February 28.

The pipeline has been a target of oil thieves and vandals since it was inaugurated after Aiteo purchased a 45% stake from SPDC in 2015.

Nigeria could be spending as much as N1.86 billion on subsidy daily going by the current landing cost of petrol which is N180 per litre, TheCable Petrobarometer can report.

Speaking on NTA’s Good Morning Nigeria show, Ibe Kachikwu, the minister of state for petroleum resources, said the landing cost of petrol is now N180 per litre.

Figures from the September 2018 financial results of the Nigerian National Petroleum Corporation (NNPC) showed that daily petrol consumption has now averaged 53 million litres.

To maintain a retail price of N145 per litre, the government will have to pay N35 on every litre of petrol consumed.

Referring to the subsidy regime which ended in May 2016, the minister said the government could not sustain payments to marketers and still owes them.  

“When you look at the gap today, the landing cost is about N180 per litre at a sale price of N145. Imagine if it (pump price) was N90-something; we will literally be a bankrupt country. Thank God it didn’t happen,” he said.

“I was gung-ho when I assumed this position that there was no way I was going to tolerate a subsidy regime at the time in 2015 of about N1.2 trillion, N1.3 trillion going on. There was just no way. We didn’t have the capacity to continue to pay. Today we’re still owing money arising from those subsidies.”

Different officials of the Buhari-led administration have denied paying subsidy; saying the NNPC is responsible for the under-recovery.

‘SUBSIDY CAN BE  PHASED OUT SEQUENTIALLY’

Although the NNPC is presently the sole importer of petrol after private investors pulled out due to their inability to recoup their investments, Kachikwu said the subsidy regime can be phased out sequentially.

According to him, prioritising the rebirth of the refineries and deregulating the downstream sector to some extent, can phase out subsidy.

“I think, first and foremost, we need to find a way of fixing refineries fairly quickly. Whether it is the private sector, government funded or whatever, my preference has always been for private sector funding,” he said.

“It may well be possible to have a twin system whereby some filling stations are able to do their business on a commercial basis– they’re not government entities.

“They bring in products and sell at their own profit. We tried it when we removed subsidy the first time and what we found out was that prices started going down because the competition was very good for the system.

“Then you have NNPC which is government supported… come up with a system which says transporters can go through NNPC filling stations and over a period of time on an experimental basis, sell your own products at a slightly subsidised volume.

“What you will have is a huge volume of imported products, imported on a purely commercial basis, sold on a purely commercial basis, and some elements will obviously be semi-subsidised over a period of time until we find that there is no need to continue it.   

“Ultimately, someday, we’ll get to a point where the issue of the price of selling a commodity is no longer the price of government.”

Yakubu Gowon, a former military head of state, says Nigeria would not be dependent on fuel imports if plans by his administration to build five refineries had succeeded.

Nigeria currently imports most of the refined petroleum products in circulation through crude oil swap deals and falls prey to scarcity of the products from time to time.

The government owns four refineries with a combined installed capacity of 445,000 barrels of oil per day (bpd) but have been operating well below capacity, hitting an all-time low in 2017.

But speaking at the second annual Oil and Gas Trainers Association of Nigeria (OGTAN) international conference in Lagos on Monday, Gowon said three refineries designed for local consumption were built during his rule between 1966 and 1975.

Gowon said one of the export-oriented refineries would have been dedicated to the local market to meet rising demand.

“During our time, we planned to build five export-oriented refineries to be able to deal with exporting of crude oil for refined products,” he said.

“But then, we had the three refineries–Port Harcourt, Warri and Kaduna–for home consumption.

“Today our consumption has grown more than the three refineries can do, and what would have happened is that we would transfer one of the export-oriented refineries to feed the local market.

“That is the way that it would have been.”

The former head of state hoped that the modular refineries coming on stream will reduce the nation’s dependence on petrol imports and bring an end to subsidy.  

“With the modular refineries coming up, I hope things will improve and there will be reduction of our dependence on export of our crude oil for refined petroleum products as this has created a lot of problem like subsidy and other challenges,” he said.

“I hope the modular refinery will solve the problem.”

Femi Falana, human rights lawyer, has written a letter to Ibe Kachikwu, minister of state for petroleum resources, demanding information on the “loss of $60 billion oil revenue under the freedom of information (FOI) act.”

In the letter dated April 10, the human rights lawyer requested Kachikwu to provide details on how Nigeria lost $60 billion oil revenue from non-implementation of production sharing contract (PSC) terms between the federal government and international oil companies (IOCs).

Falana also disclosed that he had previously alerted the minister, who was then the group managing director of the Nigerian National Petroleum Corporation (NNPC), of the non-implementation of the PSC terms.

The PSC terms between government and IOCs clearly spell out the amount of money that the country receives in signature bonuses, taxes and royalties and how much oil or gas the companies must share with the government during production and contributes largely to government revenue.

Giving more reasons for his request, Falana said even Kachikwu himself had confirmed the huge oil revenue loss, blaming it on “public officials,” with a more recent confirmation made by the acting chairman of the Revenue Mobilisation Allocation and Fiscal Commission.

The human rights lawyer gave the minister a seven-day ultimatum to provide the requested information, saying that he will be forced to seek a court order if Kachikwu fails to do so.

The letter sent to TheCable Petrobarometer on Sunday, read in part: “In my letter addressed to you in your capacity as the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), I called your attention to the refusal of the regulatory agencies in the Ministry of Petroleum Resources to enforce the Production Sharing Contracts signed with the International Oil Companies by the Federal government.

“In a public statement credited to you sometime in August 2017, you did disclose to the media that Nigeria had lost not less than $60 Billion due to the refusal of some public officials to implement the terms of the Production Sharing Contracts between the Federal Government and the International Oil Companies.

“In another public statement made on January 19, 2019 by the Acting Chairman of the Revenue, Mobilization, Allocation and Fiscal Commission, Mr. Shetima Bana confirmed the loss of oil revenue of $60 billion arising from the non-implementation of the said production sharing contracts.

“In view of the foregoing, I am compelled to request you to furnish me with information on the revenue of $60 billion which the Federal government has refused to collect from the International Oil Companies as at August 2017. As this request is made pursuant to section the provision of the Freedom of Information Act you are required to supply the requested information not later than 7 days from the date of the receipt of this letter.

“TAKE NOTICE that if you fail or refuse to accede to my request, I shall be compelled to apply to the Federal High Court to direct you to avail me with the information on the loss of the oil revenue of $60 billion.”

KACHIKWU RESPONDS

Responding to Falana, a letter signed by Oge Modie, chief of staff of the petroleum ministry, acknowledged receipt of the FOI request on April 11.

“On behalf of the Honourable Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, this is to acknowledge receipt of your letter dated 10th April, 2019 and received 11th April, 2019 on the above subject matter,” the letter read.

“Please accept the assurances of the Honourable Minister’s best regards.”

The Nigerian National Petroleum Corporation (NNPC) has urged Nigerians to disregard rumours of an impending scarcity of petrol in the country.

In a statement issued by Ndu Ughamadu, NNPC spokesman on Thursday, the corporation said such rumours were “tales fabricated by mischief makers with intent to create undue panic in the prevailing sanity in the fuel supply and distribution matrix across the country”.

“The Nigerian National Petroleum Corporation (NNPC) has once again appealed to Nigerians to disregard trending social media report of an impending fuel scarcity due to purported refusal by some oil  marketers to lift products from depots,” the statement read.

The state oil firm reassured Nigerians that it already has an ample stock of over one billion litres of petrol, with over two billion litres secured for April through imports of 48 vessels  with each having a capacity of 50 million litres of petrol.

It said there was “no need for panic buying or hoarding of petroleum products in anticipation of a phantom scarcity.”

Lukman Otunuga, a research analyst at FXTM, says the current rally in oil prices may not last if demand for the commodity slows on fears of weakening global economic growth.  

Brent crude futures — the global benchmark — reached a five-month high on Monday, peaking at $70.74 per barrel, while US West Texas Intermediate (WTI) futures also peaked at $63.46 per barrel.

The price increase is closely linked to an escalation of internal conflict in Libya, which pumped 1.1 million barrels of oil a day (b/d) in March, adding to supply risks from Iran and Venezuela, fellow members of the Organisation of Petroleum Exporting Countries (OPEC).

But Otunuga said an increase in global supply brought about by the US shale revolution could also keep a lid on the price.

“Given how US Shale production reached a global record of 12.2 million barrels per day (bpd) in March and concerns over plateauing global growth are fuelling fears of reduced demand for Crude, the current upside on oil may be limited,” Otunuga said in a mailed note to TheCable Petrobarometer.

“Any fresh signs of world growth cooling or global supply outpacing demand will signal further downside for Oil markets.”

Oil prices hit a new five-month high on Monday with Brent crude futures, the international benchmark, reaching $70.74 per barrel.

US West Texas Intermediate (WTI) future also hit a high of $63.46 per barrel in the commodities market.

On Friday, Brent crude first hit the $70 mark for the first time in 2019, after falling to a low of $50.47 in January from $86.29 in October.

Crude prices have been on the rise since the beginning of 2019, with Brent gaining as much as 31% since January amid a squeeze in global oil supply.

Ongoing supply cuts and US sanctions on Iran and Venezuela have been the major driver of prices throughout this year.

Both countries’ oil production levels are in decline, and are expected to account for a total of 1.76 million barrels per day (bpd) in lost output this year.

But the latest price boost has been linked to renewed tensions in Libya, a member of the Organisation of Petroleum Exporting Countries (OPEC), causing fears of a further supply disruption.

In addition, the supply cut deal of OPEC and its allies continues to put upward pressure on crude prices.

Dubbed as OPEC+, the cartel and its allies agreed in December 2018 to lower total production by 1.2 million bpd for the first six months of 2019 to balance the market.

Nigeria, which was exempted from the previous production cuts deal, agreed to a quota under the current agreement.

With a reference level of 1.738 million bpd, the country was given a new quota of 1.685 million bpd.

Ibe Kachikwu, minister of state for petroleum resources, has urged indigenous oil and gas companies to reduce their production costs in order to get approval for projects.

Kachikwu was speaking during the opening ceremony of the 2019 Nigeria Oil and Gas Opportunities Fair (NOGOF) in Yenagoa, the Bayelsa state capital on Thursday.

According to him, although the current cost of oil production is around $23 per barrel, some companies in joint venture agreements with Nigerian National Petroleum Corporation (NNPC) are producing at $15 per barrel.

He said the private sector should target production costs of below $15 dollars per barrel, adding that this will lead to an inflow of foreign direct investment.

“The ministry is going to come up with a benchmark to analyse and compare companies who do business in Nigeria and what cost of production they are running,” he said.

“This is because any unbelievable cost of production basically impacts the revenue stream of the country.

“We need to start finding out how companies awarded recognition are doing, and why are the others not going in that direction.

“However, excuses of the environment being different or absent infrastructure can no longer hold water, because there are a lot of countries with a peculiar situation as ours that are producing oil at relatively lower levels.

“One of the mandates that I am giving the Department of Petroleum Resources (DPR) is that as we begin to look at new projects, the cost at which we are going to produce is going to become critical to our ability to approve those projects for you… so, it is becoming a major front-burner item.”