President Muhammadu Buhari has ordered the Nigerian National Petroleum Corporation (NNPC) to take over the entire operatorship of the Oil Mining Lease (OML) 11 from the Shell Petroleum Development Company, Royal Dutch Shell’s Nigerian subsidiary. The directive was given in a letter to the Group Managing Director of NNPC, Maikanti Baru dated 1 March and signed by the President’s Chief of Staff, Abba Kyari. It states that the state oil company should take over the OML 11 no later than 30 April, 2019, and ensure a smooth re-entry given the delicate situation in Ogoniland. It also directed that NNPC and the Nigerian Petroleum Development Company (NPDC) to confirm the ownership change by 2 May 2019. The letter was received on 5 March by the NPDC, the flagship oil exploration and production subsidiary of the NNPC and the liaison office of the firm. OML 11 lies in the southeastern Niger Delta and contains 33 oil and gas fields of which eight were producing as at 2017, the latest year for which figures are available.

A hedge fund managed by VR Capital Group has taken a large stake in Process & Industrial Developments (P&ID), an energy company that won a claim against Nigeria which is now worth $9 billion. P&ID, a small energy company founded by two Irishmen, is trying to make Nigeria settle or allow the company to start seizing assets, according to a Bloomberg report. Following the sudden death of President Umaru Yar’Adua in 2010, Nigeria did not honour a deal allowing P&ID to harvest hydrocarbons. Two years ago, P&ID won a decision against the government of Nigeria, with a London arbitration tribunal awarding it $6.6 billion while the interest of $1 million is accruing daily. P&ID, owned by the hedge fund and a firm called Lismore Capital, has hired lobbyists, lawyers, and a public-relations firm to press for collection of the award. The legal team is also trying to confirm the award in Washington and London courts, which would allow P&ID to start seizing Nigerian assets in the US and the UK. Dayo Apata, the Solicitor General of Nigeria, said the FG “will ensure that its interests and that of the people of Nigeria are vigorously defended”, and added that “excessive award” was granted because the arbitration panel assumed too much confidence in the success of P&ID’s project in calculating damages accrued.

The Independent National Electoral Commission (INEC) has declared the gubernatorial elections inconclusive in no less than five states. These include Adamawa, Benue, Kano, Plateau, and Sokoto. In Rivers, where INEC suspended collation, the electoral body blamed widespread disruption of voting and collation of results by unauthorised persons. The Peoples Democratic Party was in the lead in all of the troubled states except Plateau. On 12 March, the electoral body fixed 23 March for supplementary polls in these six states.

ISWAP has released an audio message in the Hausa language confirming the deposition of Abu Musab al-Barnawi as the leader of the group. Interestingly, al-Barnawi announced his own sack in the audio recording, and on Wednesday, journalist Ahmad Salkida reported that at least one other faction had emerged within ISWAP. What is not clear at this time is which faction will receive the backing of Islamic State, and claim the bulk of the fighting force within the group.

Commentary

  • For a while now, the Ogoni fields are shut in, and this move would allow production to be restarted if the government can reach a deal with the community on starting its much vaunted environmental cleanup and also invest in revitalising the facilities. However, the manner in which the change is happening, by executive fiat rather than by negotiation, leaves a lot to be desired, especially in terms of business certainty. This is not a decision that can be taken unilaterally. There are Joint Operating Agreements that govern how JVs operate, and there are clear rules about how operatorship can be reassigned. On a final note, there is nothing in the NNPC or NPDC’s record that suggests it is capable of running OML 11 profitably. Another round of concessions would be the preferred option and only after the Ogoni environmental cleanup has been concluded.
  • While we believe that a less arduous settlement will be reached, the crux of the matter is that we expect that the final amount Nigeria will pay in taxpayers’ money will still be substantial. In Nigeria, contracts are viewed as an option, and not a sacrosanct agreement between two parties that creates obligations in compliance and significant liabilities when in breach. The Nigerian government had the chance to settle this for much less but it did nothing. The statement by Dayo Apata, the Solicitor General of Nigeria, gives more insight into the government’s thinking on this issue. Mr Apata must surely know that in international business, the rule of law will prevail and once the firm succeeds in London and Washington DC courts, it will be legally empowered to move on Nigeria’s assets. The news that VR Capital Group has taken a stake in P&ID hints at a wider impression that a successful legal outcome is indeed in sight.
  • The uncomfortably high number of inconclusive elections raises the questions about why so many votes were invalidated. It shows that INEC still has its work cut out, particularly on voter awareness about how to vote without running the risk of an invalidation and working with security agencies so that election violence is properly addressed. We await to see the conduct of the supplementary elections, but it is likely that no matter who wins, the loser will challenge it at the petition tribunal, leading to more uncertainty.
  • It is possible that Abu-Musab Al-Barnawi made the audio recording under duress with the intention to show a publicly united ISWAP. The heavy reference to leadership changes amongst the first Caliphs from early Islamic history, and also to Abū Bakr al-Baghdadi, the reclusive ISIS caliph with orders that everyone should follow the new leader, make it seem that this was done to quell any likely disenchantment within the ranks and to prevent the formation of another faction within ISWAP. The coming weeks will determine how the group will fare with the leadership changes as well as the emergence of a new faction and if true, how it will operate.