Shell oil block divestment plan runs into hitch

10 October 2011, Sweetcrude, Lagos- Plans by Shell to conclude sales agreement for its share in four Nigerian oil blocks have run into a hitch following a row over the operatorship of the oil blocks located in the Niger Delta.

Some of the bidders for the blocks are now asking for a review in the bid prices or outright refund of the money already paid for the blocks after the Nigerian National Petroleum Corporation insisted that none of the prospective new owners of the blocks would take over as the operator, the sources said.

TOP NNPC sources said while the Corporation was not against Shell divestment plan, but that the NNPC has according to the country’s oil law, taken over the operatorship of the blocks.

Already, NNPC has placed a caveat emptor on those blocks and we have made it known to Shell that operatorship does not come with divestment, the official said, adding that while the NNPC welcome the Shell divestment plans, as the company wishes, but it has no right to confer operatorship on any new investors.

Shell however, insists that while deals agreed so far between the company and the bidders complied with Shell’s contractual rights and obligations as well as Nigeria’s oil laws, the oil giant did not transfer operatorship of any of the blocks.

Some sources close to the deals, however, disclosed that bids for the blocks attracted as much as over $1 billion, on the assumption that the successful bidders would operate the oil blocks. The bidders are seeking for review of the bid price now that they know that they will not operate the assets.

Shell, Total and Eni are selling their combined 45% of the blocks OMLs 30, 34, 40 and 42, in the Niger Delta. NNPC

Elcrest Exploration and Production, the joint venture between Africa-focused firms Eland and Starcrest, said in June it had agreed to buy the 45 % interest in block OML 40, while A consortium of Nigeria’s Nestoil, Aries, VP Global and Kulczk Oil Ventures, which is owned by Polish billionaire Jan Kulczyk, had reached a deal on OML 42.

Conoil is known to have completed a deal for OML 30 while, a consortium of Niger Delta E&P and Petrolin were strong favourites to pick up OML 34.

NNPC’s take-over of the blocks might not be unconnected with the bid hit the target to raise the oil production of the Nigerian Petroleum Development Company (NPDC) to 250,000 b/d in four years time

NPDC currently produces 80,000 b/d of oil mainly from five acreages located in OMLs 119, 111, 65, 64 and 66.

NPDC also acquired 55% participatory interest in OMLs 4, 38 and 41, also previously operated by Shell. Fields in the blocks have a total output of 30,000 b/d.

Petroleum Resources Minister Diezani Alison-Madueke said in September that the assignment of some blocks to NPDC as well as the strategic alliances between the company and some other firms have increased the reserve portfolio of NPDC to 350 million barrels of oil, adding that the company was on its way to rub shoulders with the Brazil’s Petrobras and Petronas of Malaysia.

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