In late July, 2012, The Guardian of Lagos published a story regarding concerns about the acquisition of 45% participating interest in Nigeria’s Oil Mining Lease(OML) 30, a producing acreage by Shoreline Natural Resources Limited. The sellers are Shell, TOTAL and Eni(known as Agip in Nigeria).
The story essentially expressed misgivings that Heritage Oil, the British company which is a 45% shareholder in Shoreline Natural Resources Limited, is run by Tony Buckingham, a former mercenary who is linked to the planners of the abortive coup attempt in Equatorial Guinea in 2004 and was part of a crack military unit named Executive Outcomes, described by Britain’s leading media houses as “not simply guns for hire…but the advance guard for major business interests engaged in a latter day scramble for the mineral wealth of Africa, including oil, gold and diamond mining ventures…and offshore financial management services”.
OML 30 is the most valued acreage in the ongoing Shell Nigeria led divestment. Current production is around 55,000BOPD, from such fields as Olomoro Oweh, Eriemu, Evwreni , Oriri, Uzare and Kokori. The $850MM asking price is also one of the highest prices for Africa’s E&P, Mergers and Acquisition transactions in the last five years. It so happens that Heritage’s own divestment from two Uganda acreages, with a cash receipt of $1.2Billion from Tullow Oil, is one of the few M&A transactions in Africa that are pricier than the proposed Shoreline buy out of Shell/TOTAL/Eni in OML 30.
Like all other Shell divestments since 2010, OML 30 is located onshore, in Delta State, where Shell has had the most damaging attacks on its facilities in the last 15 years. The author’s concern in the story was that Nigeria was taking a high security risk if it allowed a man like Buckingham to be an operator in the unstable environment of the Niger Delta region, where militancy has only merely been suppressed, piracy was still rampant and crude oil theft has escalated.
That story caught the eye of Judith Burdin Asuni, a longtime peace activist in the Niger Delta region. Her response was surprising.
Some of the issues she raised in her response were:
- That Shoreline Natural Resources Limited, the Nigerian shareholder and 55% partner in Shoreline Energy Resources is “owned by my daughter’s husband’s family”.
- That the article was spurred by selfish interest of some people in government, especially some Niger Deltans who would have liked the block, but couldn’t get it, “so are stirring unrest”
- That the Nigerian government will operate the block through NPDC, the joint operator. “The Niger Delta people will interface with NPDC, not Shoreline”.
- That the acreage was originally sold to Mike Adenuga, “but he couldn’t raise the money”, so it went back on the market.
Any announcement about acreage acquisition in Nigeria will raise hackles. It is in the nature of the environment. So called “Stakeholders“ will complain and it’s true that there’s a heightened sense of self entitlement by Nigerian citizens who hail from the Niger Delta. But it’s a democracy, and people have a right to say what they feel about a transaction within the limits of the law. But there’s validity in calling attention to a man who was a certified leader of armed groups who have helped destabilize countries in Africa is disingenuous.
Mrs Asuni projected a mother hen image in her response to the article. This American born Nigerian citizen has become so Nigerianised, that her instinctive reaction to a story that links a Nigerian company with a British with a murky past is to say: Ho. He’s not nice but please don’t say anything bad about him. His partner, “Shorelline is owned by my daughter’s husband’s family”.
This “Coker Is My Cousin” attitude aside, Mrs Asuni admits that she too is “unhappy with the choice of Tony Buckingham for anything in Nigeria”(her exact words) and goes on to say that “Yes, Tony Buckingham is head of Heritage Oil but he will not work in Nigeria and ill not have a strong influence on what happens here”.
That’s a big fallacy.
Whereas Heritage Oil has been an operator elsewhere in the world where it has interests, its Nigerian co-venturer Shoreline Power, who is supposedly the senior partner, has never seen action as an operator. Shoreline Power has been in quite a number of business interests in Nigeria (bought Costain West Africa, acquired a segment of ABB, and was once vocal about supplying power to Industrial and Residential Estates, long before the Power Reform Process heated up). But unlike every Nigerian company that has led consortia in these Shell transactions, it has not had oilfield experience. That’s why Heritage is more likely going to be the leading driver in the action on site in the Niger Delta. Mr Buckingham is certainly going to be interested in activity on ground.
Let me explain. As a rule, the companies that have bought the various Shell operated assets on offer since 2010, have been partnerships between a financing European independent and a number of Nigerian companies. Seplat(which bought OMLs 4, 38, 41) was formed by Shebah and Platform with Maurel et Prom, the French minnow, being the European partner. Platform and Shebah had quite some upstream experience before the transaction. Both were actively operating oil fields.
Neconde(which bought OML 42) consists chiefly of Nestoil and Yinka Folawiyo(Nigerian companies), with Kulczyk Oil Ventures Inc, a Polish company, as the European partner. Nestoil has been an oilfield contractor for most of its decade plus life and was involved in the construction of a major crude export pipeline for Shell. Its “baptism of fire” as an oilfield operator is the drilling of a well in Oriri marginal field, a percentage stake of which it acquired in 2011. Nestoil is the financing and technical partner in that field. Yinka Folawiyo is not an operator in the mould of Shebah or Platform, but for some 20 years it has been holder of an acreage, (now OML 113), which includes the Aje gas field.
Elcrest(which bought OML 40) consists of Nigerian company Starcrest and British company Eland. Starcrest doesn’t exactly operate any field, but it has hung around oilfield practitioners for sometime. Eland is owned by Les Blair, who may be British, but has been around for long enough in Nigeria, working as engineer in companies located in Nigeria.
Niger Delta Western(which just concluded buying OML 34) is the exception to the rule. It doesn’t have a European company in the consortium. Partners include Niger Delta Exploration Petroleum, which has been an operator for 15 years and oilfield producer for seven years; Walter Smith, an operator of a marginal field for nine years and Petrollin, owned by the Gabonese petroleum engineer and broker, Samuel Dossou Aworet.
In all these partnerships the Nigerian part of the consortium has had some experience. Shoreline Power doesn’t compare with any of them.
And there’s one more thing. Whereas Shoreline Power doesn’t have oilfield experience, Heritage, its partner, is the biggest of all European companies that have been involved in the Shell led transactions. It is bigger than each of M&P, Kulczyk Oil Ventures Inc and Eland. It will be the most influential foreign company working on the divested assets. Unlike the other consortia, the Heritage-Shoreline Power special vehicle will be “built” largely by Heritage.
Again, Mrs Asuni says it is NPDC as operator, who will operate the OML 30 asset. True. But you can’t put down $850MM(net of costs) and not be actively involved, through Joint Operating Agreement, in what goes on. Heritage Oil is the one spending all this money, obtained by securing $756MM bridge finance, $550MM of which will be refinanced with long term debt. It certainly will be in charge.
What the Guardian article was doing was to call attention to a company, run by a man who:
- Was a part of Sandline, founded in 1996 by Tim Spicer, a retired British colonel, which was hired to organize a counter coup against soldiers who toppled the government of president Ahmad Tejan Kabbah of Sierra Leone
- Was a key figure in a an armed gang engaged by the government of Papua New Guinea to suppress the Bougainville Revolutionary Army which was seeking independence from the country
Such a man could easily draw on his reserves, and resort to his old antics if he faced issues of militancy or community belligerence.
We shouldn’t be dismissing such an article on the line that it may be sponsored by “stakeholders” who are willing to block a deal. Nigeria is currently grappling with the most serious security challenges in decades. A discussion about what to do with investment by a man who has called soldiers into arms to destabilize sitting governments can only be worthwhile.