A Review of the Nigerian Energy Industry

Nestoil to sell part-stake in controversial OML 42

*Some of Nigeria’s oil and gas acreage.

OpeOluwani Akintayo

30 March 2018, Sweetcrude, Lagos — Oil services firm, Nestoil Energy Limited, NEL, plans to sell part of its shares in controversial Oil Mining License, OML 42, being managed by Neconde, SweetcrudeReports has learned.

According to information at our disposal, the firm plans to sell some of its stake in the Special Purpose Vehicle, SPV, cutting down its stake in the Oil Mining Lease (OML) 42, located in the Western Niger Delta.

Nestoil holds 80% shares in the SPV.

Nestoil had been at the fore of Neconde SPV, which bought over Shell/TOTAL/ENI’s 45 percent shares in the acreage in 2012.

The Nigerian National Petroleum Corporation, NNPC owns 55 percent of the stake.

Out of the $585 million paid for the 45 percent equity in OML 42, the consortium of Nestoil, Yinka Folawiyo, and KOV paid $435 million as equity and collectively raised $150 million in debt financing.

According to our sources, Neconde finds it difficult attaining optimum output, adding that there are backlogs of debts the company is struggling to pay, making expansion plans a distant prospect.

The company’s operations were also affected by the oil price crash of 2015, likewise bombing of its the crude oil evacuation facility by the Niger Delta militants, forcing the terminal to shut in for 16 months between February 2016 to June 2017.

Although Neconde said it produces about 100,000 barrels a day, however, information at our disposal is that the company has been producing less than 20, 000 barrels per day for over three years.

SweetcrudeReports reached out to Nestoil’s public relations’ team but was told the spokesperson had resigned two months ago and is yet to be replaced. Similarly, Neconde spokesperson could not be reached for comments at the time of filing this report.

In a related development, a fresh controversy broke over OML 42.

A report by Bloomberg said a former vice president for Shell sub-Saharan Africa, Peter Robinson, is suspected to have been involved in the sale of OML 42.

The deal (OML 42) came into focus after prosecutors in Milan alleged that in the same year Shell and Italian oil company, Eni SpA paid more than $1 billion for OPL 245, knowing that much of the money would go to pay bribes to Nigerian officials.

Several former executives of the company, including Robinson, are already facing a criminal trial in Milan over an alleged bribery scheme related to the separate purchase of a Nigerian oil block called OPL 245.

Although Shell denied any wrongdoing in that case, however, while investigating those charges, it began to suspect that accounts in Switzerland and a company in Seychelles in Robinson’s name were used to take kickbacks from the sale of another block called OML 42, said a person with direct knowledge of the matter, who asked not to be identified because the information isn’t public.

“Based on what we know now from an internal investigation, we suspect a crime may have been committed by our former employee,” Shell said in an emailed statement. “We were stunned and disappointed when we learned about this.”

Robinson worked in Nigeria for Shell from 2008 to 2011 as vice president for Commercial in the sub-Saharan Africa region, part of a more-than-30-year tenure with the company. His lawyer in the Milan case, Chiara Padovani, wasn’t immediately able to respond to a request for comment. She said last week that her client denies accusations of corruption made by Italian prosecutors.

The criminal trial in Milan also involves Shell’s former upstream director Malcolm Brinded and Eni’s current Chief Executive Officer Claudio Descalzi. Both men deny any wrongdoing.

The criminal referral against Robinson was filed last week, said the person with direct knowledge of the matter.

“It appears he acted alone and took strong measures to avoid detection within Shell by failing to report companies and accounts registered in his name that fell outside the company’s protocols on eliminating conflicts of interest, the person said. Some of the emails Shell is scrutinizing are encrypted”, the person said.

Swiss Account
Prosecutors in Milan, as part of their investigations into whether part of Shell and Eni’s payment to the Nigerian government for OPL 245 was funneled to other individuals, have been looking at links between Robinson and a Seychelles-based company called Energy Venture Partners Ltd., court documents show.

A bank account linked to Robinson was frozen by the Attorney-General in Switzerland after requests for legal assistance from the Dutch and Italian authorities, people familiar with the matter said last week. Several hundred million Swiss francs were in the account, the Tages-Anzeiger newspaper reported, citing people it didn’t name.

Shell’s own investigation has so far concluded those accounts weren’t linked to the OPL 245 transaction, but instead may have been used for kickbacks from the sale of OML 42, the person said.

“On OPL 245, we continue to believe, from our review of the prosecutor of Milan’s file and all of the information and facts currently available to us, there is no case to convict Shell or its former employees,” Shell said by email.

Last year, oil workers under the umbrella of the Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, had threatened to shut down OML 42 over non-compliance with an agreement reached on a transfer of 25 workers to Warri.

Same last year, an allegation of tribalism was also levied against the firm by Gbaramatu communities in Warri.

The communities had alleged that the management of Neconde refused to honour an agreement to remit 5.0 percent of its 45 percent equity to OML 42 host communities and that there has not been any community re-entry project since recommencement of oil exploration activities in OML 42 in 2012.

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