A Review of the Nigerian Energy Industry

Nigeria: Trouble over OML 42

Section of Nigeria's oil and gas acreage.
Section of Nigeria’s oil and gas acreage.

•Alleged sale pits Petroleum Ministry against NPDC staff

24 May 2015, Lagos – The nation faces imminent black out ahead of the May 29 hand over date due to the Utorogu gas plant in Delta State, shut down by the striking staff of the Nigeria Petroleum Development Company (NPDC), a subsidiary of the NNPC. It has not been well with the NPDC, which has its headquarters in Benin City, in the past three weeks, following protests by the staff of the company over the alleged decision by the Federal Government to sell what has been described as one of the most priced oil bloc in the country, the OML 42.

The crisis worsened on Wednesday when the staff locked out the Managing Director of the company, Mr Anthony Muoneke, over the issue. “At press time, the workers had shut down the entire flow station in the Niger Delta apart from the OML42 which closure was resisted by soldiers.“A top union member in the company, who craved anonymity, told Sunday Vanguard that the crisis in NPDC started early this year when the workers learnt that the OML42 was being sold to one of their major contractors. “When we heard this rumour, we held a meeting with the Managing Director, Mr Muoneke, and told him about what we heard. He told us there was nothing like that. But three weeks ago, we received a circular from the Ministry of Petroleum that we should hand over to this company”, the union leader said.

He went on: “NPDC is in joint venture partnership with another firm on OML 42 in the ratio of 55% to 45% respectively. NPDC was appointed operator of the bloc in Dec 2011 owing to her long years of experience (27 years) in the exploration and production of oil and gas in the country. The company is a wholly owned subsidiary of the Nigerian National Petroleum Corporation (NNPC) with responsibility for Petroleum Exploration and Production activities. It currently operates 10 assets under its portfolio with varied interests in many other concessions. The NPDC is currently the 5th largest producer in the country with about 205,007bopd production.

“In the area of gas production, NPDC is the largest domestic gas producer with more than 650MMSCF/D to its credit. The company has ramped up gas production from its Utorogu & Ughelli East fields in OML 34 to 420MMSCF/D, a feat that has never been achieved in the life of the bloc (even when Shell was the operator). The partnering firm, on the other hand, was created three years ago (Dec, 2011). It has no record of exploration and production of oil and gas in Nigeria. Perhaps that explains why the company was not considered as the operator of the bloc at the outset. “The owner of the partnering firm is also the owner of the major contracting company benefiting from most pipeline and other maintenance contracts from the asset.

“We believe that ceding the operatorship of a national asset from a national oil company to a company with only three years experience in the exploration and production of oil and gas anywhere in the world is the greatest disservice Nigeria can do to herself. That is why we are rejecting this. If at all you want to sell a priced asset of such, it must be advertised and people will bid. That is the law. So for the government to sell off this asset, it is shocking. Why the hurry? Why are they doing this few weeks to the hand over date? As we speak, they are intimidating us, warning that people will be sacked if the public knows what is happening but some of us said we cannot keep quiet, this country belongs to all of us”. As a result of this crisis, it is feared that the power sector may be crippled following the shutting down of the Utorogu gas plant which is producing almost 360million Standard Cubic Fit of Gas (SCFG) per day. Sunday Vanguard was informed that the plant generates about 25 per cent of the gas for power plants in the country. And as such the nation’s oil exploration is dwindling with the loss of 50,000 barrels of oil daily since the inception of the strike by the NPDC staff. Efforts to reach the management of the company to react to the claims against it proved abortive as soldiers and mobile policemen took over the entire premises. “Sunday Vanguard, however, spoke with a former Managing Director of the NPDC, Engr Chris Ogiemwonyi, on the issue. Ogiemwonyi is also a former Managing Director of the Nigeria Gas Company and Group Executive Director of NNPC before his retirement six years ago.

What is your take on the ongoing strike in NPDC and the alleged sale of the OML42 by the Federal Government?
First and foremost, I tried not to believe that the management of the NNPC will be selling their assets. The reason being that when we started NPDC, our first project was Oredo field project, we used that green field as a training ground to acquire expertise, to develop the capacity of our young engineers. At that time, I was a project leader. NPDC is supposed to be a powerful section in the oil industry, so if what we are hearing is true, then there is a problem because instead of growing capacity, they are dissipating capacity. It is too early because the assets we are hearing are assets they acquired from their JV partners which is SPDC. So it is rather very unfortunate that they are selling their assets. One of the Ministers did it and he is in our bad books because we said when we had about ten blocs, they gave out about seven which were the prolific ones.““This is the first time NPDC is getting juicy assets, so it is rather unfortunate if now we are giving the assets to some contractors. The problem with NNPC or the outgoing government is that they have been selling assets to people without experience. For example, when they were selling the PHCN, one would have expected some renowned professionals in the various GENCOs and DISCOs. If you are selling assets of PHCN, people like Engr. Shomolu, a former Director, should have been involved. But we have sold these assets to lawyers and bankers. It is the same thing that is happening in NNPC, selling our assets to business men and not professionals, it is sickening, very sad.

The question is, what happens to the NPDC staff managing these assets? It means you have to start retrenching them, that is one. Two, we are still growing capacity, this is an area where our boys should learn, acquire more experience. If you sell it, in terms of acquiring experience, they are shut out. Every company is trying to make a strong E&P company. Don’t forget today that NPDC is still a small company; apart from what we got from Okpuno Okpono that we got through joint effort with Agip, this is the time we should be giving NPDC juicy assets, assets which are prolific. OML42 is a prolific asset. All these years, NPDC has been operating marginal assets.
Why are they not selling OML64 & 66. If they want to sell, they should sell those ones. Those are small assets but, this time, the reverse is what we are seeing, they are selling the major assets to contractors, all to give NPDC a bad name that they cannot work. I know we have capable hands in the NNPC, we have capable hands that we trained that can deliver. For Christ sake, leave these prolific assets for them to manage, don’t kill the morale of these boys.“

What Buhari must do
“It is so simple. I recall in our days, when I was head of NAPIMS and we had Obasanjo as President, everything we did was advertised. The bottom line is to insist on due process, let everything in the oil sector be advertised. Once you advertise it, NNPC will put a strong technical committee to evaluate the bids submitted. Based on the best bid, that is the company the job should be given to. The issue of leakages, what do you mean by 400,000 barrels of oil leaked in one day? How come when we were there these things never happened? I left NNPC six years ago, don’t forget I went through the key sectors, the key SBUs. I was head of NAPIMS, I was head of NPDC, I was head of NGC before I became GED Upstream, we never heard about leakages. We were hearing of theft of 200 barrels a day, we never heard of 100,000, now 400,000 and, when you now project it on a daily basis, that is outrageous.“How are they taking these things out? These are areas I just don’t want to discuss because I believe there is so much connivance, otherwise how are you evacuating 400,000 barrels per day? Is it through ship, is the ship sailing on water? If it is sailing on water, where are the security agents? It is something we should be ashamed of saying that we are losing 400,000 barrels, some times 500,000 barrels. What is Ghana producing? What is Angola producing? Go and check, then you will know that this magnitude is unheard of anywhere in the world. The simple problem we have here is lots of compromising. But I know that when Buhari comes, he will put an end to this rubbish, they have killed the oil sector.

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