Shell vs Wike: Finding a workable solution for OML 11 and Kidney Island

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Governor Nyesom Wike

By Charles Matthew

Almost 3,000 direct and indirect employees as well as contractors and sundry interested parties of Kidney Island received a delightful New Year present when news filtered out late on December 31st, 2020 that Governor Nyesom Ezenwo Wike of Rivers state the “new” owners of OML 11 had directed the unsealing of the Island following a meeting with Mallam Melo Kolo Kyari, the GMD of NNPC.

The news report in Vanguard read: “Governor Nyesom Wike has reopened Kidney Island, the Shell Petroleum Development Company (SPDC) operational base sealed and taken over in Port Harcourt by the Rivers State Government since 23rd of December 2020. A statement by Kelvin Ebiri, Media Assistant to the Governor, noted that ‘Wike, after a meeting with Group Managing Director (GMD) of the Nigerian National Petroleum Corporation, NNPC, Mele Kolo Kyari, in Port Harcourt, Thursday, directed immediate reopening of Kidney Island for the operators (Shell). Kyari commended Governor Wike and the Government of Rivers State for their cooperation, while further discussion to resolve the underlying issues continue.’”

Kidney Island is an operational and logistics facility located inside OML 11 which is owned by Shell Petroleum Development Company (SPDC) and its JV partners. Shell owns 45% equity in the assets which is considered as potentially one of the most prolific at optimum production levels.

After decades of a long and protracted legal tussle between Shell and the Ejama-Ebubu community caused by a disputed oil spill during the civil war, the courts had ruled against SPDC following which Rivers State government, ostensibly acting on behalf of the community, took over SPDC’s 45% equity following “a bid of $150m supported by a bank guarantee and cash payment to the Deputy Sheriff in the sum of N1bn, the latter payable to the judgement creditors while the former is escrowed.”

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Emboldened by the Supreme Court’s November 27, 2020 affirmation of the purchase, the  state government sealed off the island on December 23.

Addressing journalists media at a press conference on that same day, the Attorney General of Rivers State, Professor Zaccheus Adangor, SAN, announced that Kidney Island now belonged to Rivers government pursuant to a certificate of purchase registered in the Lands Registry as No. 6 at page 6 in Vol. 46, Port Harcourt. The certificate of purchase was issued by the order of the High Court of Rivers State on July 23, 2019 and September 25, 2019 following the purchase of the facility.

SPDC’s reaction was swift with the company describing Wike and Rivers State government’s sealing of the property as “premature and unlawful” since it had already filed a stay of execution.

That unilateral action of the Rivers government signaled a ratcheting of the rhetoric around the court judgement, the  state’s claim of ownership and who had operatorship of the contentious assets.

But legal niceties aside, what has intrigued industry watchers has been the Federal Government’s deafening silence until the December 31, 2020 intervention by the NNPC GMD especially since the FG has a stake in every JV partnership.

Secondly, JV partnerships are governed by Joint Operating Agreements which spell out the finer details of the joint venture partners. Viewed from that prism, Rivers State government’s purchase of 45% equity does not rest operatorship or landlord rights for that matter on them.

Industry watchers were therefore confounded not just by the action of Rivers State government but also by the seeming nonchalance from the authorities and even other JV partners.

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2020 was a difficult year during which the global economy was buffeted by headwinds caused by Covid-19 which has resulted in many countries going into recession. Forbes projected that the world economy will “only grow 3% this year, according to IMF estimates—that’s the slowest rate of expansion since the global financial crisis started in 2008.”

Nigeria has not been spared. The country entered into recession in the 4th quarter and the oil and gas industry which supports Nigeria’s largely mono-product economy has been hard hit.

This is reason why industry watchers are worried that the fate and future of a key logistics and operational base which supports and facilitates the operations of SPDC as well as others like Amni, Conoil, Oriental Energy, Moni Pulo and Century is being trifled with.

Kidney Island employs over 2,500 people in direct and indirect capacities and its local content program supports almost 20 local contractors from  host communities.

The one week shutdown of the facility is believed to have cost the industry in excess of 35m US dollars as revenue lost from stalled rig programmes, fees and levies due to government agencies like NPA and NIMASA as well as operational charges to parties who require access to and through the facility.

With the legal battle all but won and lost, what remains now is a sheathing of the swords and Mallam Kyari’s intervention provides a fitting time out for both SPDC and Wike to find a common ground.

Kidney Island is key and strategic not just to SPDC but to the community, the workers, the companies that require access as well as the state government.  It will not do for this fertile piece of grass to suffer while two elephants contend. The time has come to find a workable solution for OML 11 and Kidney Island.

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Vanguard News Nigeria


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