By Macson Obojemuinmoin
ENI and Shell have not made much progress in returning to activity on the Oil Prospecting Lease (OPL) 245 in Nigeria’s deep offshore, despite a string of court victories validating their case in UK and Italian courts.
The Nigerian government has maintained a steadfast opposition to the majors’ claims that there was nothing fraudulent about how they won the rights to the asset.
The legal wranglings have put, on the back of the burner, development plans for Etan and Zabazaba fields, two commercial sized discoveries made on the lease.
But can these two major European partners lose the asset, if they don’t settle the legal issues with the government by the terminal date of the Production Sharing Contract (PSC) governing the acreage, which comes up sometime in 2023?
Or can they still lose the asset, if they resolve their legal issues before the PSC’s terminal date, but are seen as not having carried out sufficient work programme to develop the acreage?
“The case against ENI and Shell by the Federal Government of Nigeria is a separate issue from the commercial activity that the two companies have carried out on the asset”, argues Austin Avuru, former Chief Executive of Seplat Petroleum and chair of the influential Petroleum Club of Lagos. “If the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) elects not to renew the licence based on the legal issues, or on the grounds that they haven’t advanced on the development, the action will be deemed punitive”.
Avuru would not respond to inquiry about widespread speculations that there are interests, deeply ensconced in the Nigerian political system, who are hoping to take advantage of the non-renewal of the licence to ENI and Shell.
As there has been significant work by ENI and Shell on OPL 245, in Avuru’s view, “the discussions around the renewal of the asset should focus on what the benefits are for the economy. The delay in development should be seen as a form of Force Majeure”.
Still, it is not clear when the partners will get around to resume activity on the asset.
In June 2022, the United Kingdom commercial Court held “that there is no evidence of fraud in the OPL 245 transaction between Nigeria and JP Morgan Chase Bank”. That ruling followed the March 17, 2021 ruling by an Italian court in Milan, that ENI’s CEO Claudio Descalzi and members of his management “had no case to answer” for the payment the company made to acquire its stake in the OPL 245 Lease, eleven years ago. That case had run in the Milan court for three years and Mr. Descalzi, who has been ENI’s CEO since May 2014, faced certain prospect of a jail term. On July 19, 2022, Italy’s Assistant Attorney General Celestina Gravina brought the legal proceedings on the case to a close by waiving the possibility to appeal against the Court’s decision of 17 March 2021.
But the Nigerian government has remained unimpressed by these rulings, outrightly dismissing the ruling in Milan as disappointing and going cold on the UK ruling. The country’s Economic and Financial Crimes Commission (EFCC) has maintained, in the Nigerian court system, “that a fraudulent settlement and resolution came under (President Goodluck Jonathan’s government with Shell and ENI buying the oil block from Malabu in the sum of $1.1Billion”. It said its Investigations into the deal “revealed crimes that border on conspiracy, forgery of bank documents, bribery, corruption and money laundering, to the tune of over $1.2Billon against Malabo Oil and Gas Ltd, Shell Nigeria Ultra deep (SNUD) Ltd, Nigeria Agip Exploration (NAE) and their officials”.
The Zabazaba-Etan twin deepwater field development is aimed at monetizing reservoirs located in 1,500 and 2,000metres below the seabed. The Field Development Plan calls for conversion of a Very Large Crude Carrier (VLCC) to a Floating Production Storage and Offloading (FPSO). Recoverable reserves for the two fields combined are in the region of 500Million barrels of oil equivalent (BOE).