A Review of the Nigerian Energy Industry

NNPC takes over operatorship of Shell oil blocks

30 August 2011, Sweetcrude, Lagos –
The Nigerian National Petroleum Corporation (NNPC) has carried out its plan to take over the operatorship of some of the oil blocks which Shell Petroleum Development Company (SPDC) is divesting.

The blocks affected are Oil Mining Lease (OML) 30, 34, 40 and 42, a development that implies that all those that have bidded for the blocks have lost out.

Shell had put the four blocks on offer to indigenous oil firms, claiming it embarked on the move to expand local capacity.

NNPC said it based its take-over of the oil blocks on section 2.4.1 of the Joint Operating Agreement (JOA) which allows a senior partner to take over the operations of blocks which any of its joint venture partners decides to relinquish. The NNPC is the senior partner, with 55 percent equity in the joint venture Shell on the blocks.

Section 2.4.1 states that when an operator ceases to be the operator of a block, it shall be removed by the non operators, if among other circumstances, the operator has signed or purported to have signed to relinquish the operatorship of the oil block, pursuant to clause 19.3 of the JOA agreement. The operator’s power, responsibilities of supervision and management as operator, then goes to NNPC.

NNPC spokesman, Dr Levi Ajuonuma, has confirmed the takeover, saying the corporation had “come a long way and we cannot play second fiddle to anybody”. He re-affirmed that the action was supported by the law governing the operation of the partnership between the NNPC and its joint venture partners.

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