FG Set to Renew Mobil, Shell, Others Oil Leases

This Day

16 December 2011

FG Set to Renew Mobil, Shell, Others Oil Leases

The Federal Government may soon renew oil leases held by Mobil, Shell and Chevron, which expired in December 2008, after the oil majors had operated for 40 years.

Bloomberg reported yesterday that Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, gave the hint in Vienna, Austria where she was attending the meeting of the Organisation of Petroleum Exporting Countries (OPEC).

"In the next four to six weeks, we will be finalsing all issues of the shallow waters renewals, the Minister was quoted by the newswires to have said. She added: " The hope is that by the end of the first quarter next year, the National assembly will have moved that forward."

At the time of expiration of the oil leases held by the multinational oil companies, totaling 16 in number expired in December 2008, the federal government balked at renewing the leases under the same terms that they had been granted to the multinationals 40 years ago in 1968.

The argument at the time, according to THISDAY report, was that the PIB was under consideration at the National Assembly, and the federal government felt if the leases had to be renewed, it would be done under revised terms that would have compelled the international oil companies to pay fees.

The decision, according to THISDAY investigation had been taken on the premise that at the time they were originally awarded to the IOCs in the 1950s and renewed subsequently in 1968, they were done at no cost whatsoever. But the government felt that since the oil-licensing regime had introduced a tender process by 2008, requiring bidders to pay a signature bonus before the award of oil leases, the IOCs would also pay a fee to get their leases renewed.

It was on this basis that the petroleum ministry, under the watch of Odein Ajumogobia, granted a one-year extension on all the expired leases, pending negotiations for extended renewals for 20 years. While Shell kicked up a fuss over the revised regime for the renewal of its leases and proceeded to court to challenge the decision by the federal government, Mobil elected to enter into negotiations to get the leases renewed.

Accordingly, a committee was set up by the petroleum ministry to evaluate the leases. The committee then determined that Mobil and NNPC would have to pay $2.55 billion to renew their leases.

Following tough negotiations during which Mobil initially refused to pay anything, the company then made a conditional offer for $75 million, but this was rejected by the committee. The US multinational eventually made a final offer for $600 million, which was accepted by Ajumogobia.

But in March last year, Alison-Madueke had written to Mobil notifying the company that "the addendum purporting to have renewed the said leases in 1971 was ab initio null and void and of no effect whatsoever." She informed Mobil that having reviewed the renewal of its leases in 2009, it had come to the notice of the ministry that the actual effective date when the leases were renewed was March 11, 1971 and not December 1, 1968.

The invalidated blocks, according to reports accounted for much of the country's oil production in 2008 when output was halved at the height of attacks on onshore oil and gas installations by militants in the Niger Delta.