OPL 245: Has Nigeria really lost $6billion

At the anti-corruption situation room on public presentation of expert analysis of OPL 245, organized by Global Witness and some other concerned groups, have casted doubts on the assertions making the rounds in the media and social media blogs, that Nigeria is losing a whooping sum of 6 billion dollars to the deal NNPC/FGN entered […]

At the anti-corruption situation room on public presentation of expert analysis of OPL 245, organized by Global Witness and some other concerned groups, have casted doubts on the assertions making the rounds in the media and social media blogs, that Nigeria is losing a whooping sum of 6 billion dollars to the deal NNPC/FGN entered into with the Shell/ENI consortium on the oil block.  It has also been alleged that the 2011 sale of the OPL 245 oil fields to oil giants Shell and ENI, is supposed to have denied the Nigerian government an additional proceed of 1.1 billion dollars. As is openly posited, this money instead, found its way into the pockets of top officials of the Nigerian Government, including one time Minister of Petroleum Dan Etete and Former President Goodluck Jonathan, to mention a few.

During the presentation of a report of analysis on the economics surrounding the deal, delivered by Resources for Development Consulting at the Rock view Royale Hotel, it became clear to all that even though the deal excluded Shell and ENI from paying royalty and profit on the OPL 245 in the earlier agreement with the companies in 2003 and 2005, there is no loss of revenue as at yet, contrary to the view that is being widely spread.

This is so because production is yet to commence on the oil field and it is expected that the first production yield would be in the year 2022. The product life cycle of the block is estimated at about 13 years from the time when oil production commences in 2022.

Considering that ENI also continues to point out that there is a provision for a back-in right that favours NNPC and the Federal Government, in the 2011 resolution agreement which when applied will enable the government to earn back 50% on profit oil sharing, it is apposite to wonder why there is a hue and cry over the revenue of 6 billion dollars that Nigeria, is at the risk of losing, or as it is even believed in some quarters, has already lost.

While we have had a chequered and beleaguered trend from inception with the OPL 245, largely due to selfish interest of officials in whose hands this valuable national asset has been trusted, time and much needed resources have been wasted.

ENI and Shell evidently do not have challenges of incompetence or capacity to deliver on their contractual obligations. They are both global giants of the industry who have right fit technology and the billions of dollars needed to harness the resource OPL 245.

As the old adage goes “you do not throw the bath water away with the baby”.  Therefore, caution is required in dealing with the report presented by Resources for Development Consulting and the call by other proponents for the outright cancellation of the OPL 245 transaction between Shell/ENI and NNPC/FGN.

Finally, there are some pertinent questions, which translate to food for thoughts for all stake holders and the general citizenry: What happens to the investment of over one billion dollars already put in by the consortium, if the aim of contract cancellation is achieved? What happens to the jobs that the going concern has created and the more jobs it potentially can create if allowed to flourish? What about the negative impact in terms of image that the cancellation could cause on other foreign direct investors into the country’s economy? What about the untidy flurry of litigations and counter litigations that would follow and the debilitating effect that such usually has on businesses, especially loss of revenue?  Shouldn’t there be concerns about the level of competence of the economic team put together to analyse and evaluate the OPL 245 transaction, particularly since it appears not one of them has cogent experience in the Nigerian upstream sector? On page 2 of the report, it is claimed that the economic analysis is based on public data and therefore has important limitations; from a peculiar Nigerian perspective, what are these limitations, if one may ask?

Dr. Alexander Richards, [email protected]