Oil Workers Shut Down Production Over Transfer of OML 042 Operatorship

Worried about the larger labour implication, the oil workers in the employ of the Nigerian Petroleum Development Company (NPDC) have shut down oil production over the transfer of operatorship of one of the country’s valued oil fields, OML 42, to Neconde Energy Ltd.

The workers under the aegis of Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the National Union of Petroleum and Natural Gas Workers (NUPENG) are calling for the reversal of the award of the operatorship to NPDC.

Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, had given approval for the transfer of operatorship of the oil block sold by Shell Petroleum Development Company (SPDC) on the ground that the NPDC, a subsidiary of the Nigerian National Petroleum Corporation (NNPC), lacked the capacity to operate the oil block.

But the workers are insisting that the NPDC, contrary to reports, has the capacity and competence to operate the said field.

Besides, the workers are aggrieved that they were not carried along by management of the NPDC in the entire process, adding that the management’s decision would not only threaten their jobs, but would jeopardise the future of the oil industry.

The production shut in has affected all NPDC-operated assets that are in a joint venture with indigenous companies that have applied for operatorship, except for Neconde, who, prior to the crisis, had been awarded the operatorship of OML 42.
The company's assets are being guarded by the Joint Task Force (JTF).

The Elcrest's OML 40, Shoreline's OML 30 and FHN/Afren's OML 26 have now been shut in, according to sources.
It was gathered that evacuation is hampered from OML 34, which relies on the OML 30 pumping station.

Oil industry experts stated yesterday that the development would have a devastating effect on Nigeria’s already dwindling  economy.
Governor of Central Bank of Nigeria, Mr. Godwin Emefiele, noted recently that “Nigeria has faced continued pressure from spiraling debts, in the face of dwindling revenues resulting from falling global crude oil prices."

Many of the 36 states of the federation are barely able to meet their obligations to contractors and workers from their monthly allocations from the federation account.

Also, Nigeria's foreign reserves has slumped to about $29.9 billion as at March ending.
Oil industry experts have expressed fears that if the industrial action is allowed to persist, it will also affect the power sector as the NPDC currently supplies at least 30 per cent of gas required to generate electricity.

The NPDC has been under constant attack for lacking the requisite technical competence and financial muscle to operate the assets in contention effectively and efficiently.

Under NPDC’s operatorship, all the oil fields have taken a nosedive in production volumes; obligations to communities have not been met and there has been a sharp drop in oil revenue.

All the indigenous companies that are in a Joint Venture with NPDC have suffered setbacks owing to the poor performance of NPDC since acquiring the licences.

The firms have lamented NPDC’s lack of capacity to continue to operate the acreages they purchased from the Shell-led consortium.
They argued that they could have done better than the NPDC was doing as operator.

"The government appears to have finally agreed with them and the perception in the industry is that the remaining three companies will soon have their prayers for operatorship answered," said a source close to one of the companies.

A management staff of NPDC, who pleaded anonymity, explained that the strike had resulted from “a breakdown in communication” between the management of the company and the union members. He further stated that under the new arrangement, the workers stand to benefit more.

The source stated that both the NPDC and the indigenous companies are all understaffed, and would require more workers.
According to him, with operatorship rights transferred to the indigenous companies, "there is bound to be a sharp increase in oil production; an increase in revenue stream; increased gas supply to domestic markets to improve power generation; community development."

In July 2010, Seplat acquired a 45 per cent participating interest in, and was appointed operator of a portfolio of three onshore producing oil & gas leases in the Niger Delta (OMLs 4, 38 and 41) with NPDC holding 55 per cent.

The company has become one of the leading indigenous Nigerian oil and gas exploration and production companies.
With Seplat’s operatorship status, it is averaging 70,000 bpd more than all the SPDC’s divested assets operated by NPDC.
Meanwhile, negotiations are in progress to put an end to the strike.

In another development, the Nigeria Extractive Industries Transparency Initiative (NEITI) has explained how efforts to push forward the frontiers of accountability in activities within Nigeria’s hydrocarbon industry is suffering setback because of government-inspired checks on access to critical industry information.

NEITI stated this yesterday at a pre-validation workshop in Abuja to educate stakeholders in Nigeria’s extractive industry on the upcoming re-validation exercise by the global Extractive Industries Transparency Initiative (EITI) in the country.

The remark of NEITI appears to be confirmed by the staff of Nigerian Petroleum Development Company (NPDC) who yesterday, shut down oil production to protest the arbitrary transfer of operatorship of one of the country’s priced oil fields, OML 42, to Neconde Energy Ltd.
NEITI noted that the seeming refusal of the federal government to mandate its relevant agencies to open up to the public, registers of licensed entities and contractual engagements in the oil and gas sector is undermining the drive to shine more light on the industry which pundits say operates opaquely.

NEITI’s Executive Secretary, Mrs. Zainab Ahmed, told reporters that this singular act of indecision by the government pushes NEITI to regularly manoeuvre, albeit the hard way, to get information from operators in the process of preparing its audit reports on the sector.
She explained that countries with fewer experience and capacities in managing extractive industry activities like Ghana, Liberia and The Gambia were ahead of Nigeria in opening up licence registers and contracts to the public.

She said: “The major challenge we have in Nigeria in implementing EITI is our inability to open up the licensing registers of the oil and gas companies; it is our inability to open up and put in the public domain operating contracts for the oil and gas sector.

"Those are our major challenges but what we have done in NEITI with the guidance of the National Stakeholders’ Working Group (NSWG) is that we have looked at the standards and said OK, standards are not really in the public but what did the requirements ask for?”

Ahmed added: “So, we extracted the requirements from the standard and designed a special template to be able to capture key information from those contracts and we send these requests to the companies and to Department of Petroleum Resources (DPR).

"So, we got those key information we thought were vital from the contracts and from the licences from both the DPR and the companies.
“In that regards, we have been able to meet the requirements by the standard albeit in this round about manner.”

She however explained that such means of gleaning the needed information for use were not sustainable, adding that: “It cannot continue to be like that and they will accept it because everybody knows the contracts are not in the public domain.

"Everybody knows the licence register is not something you can sign up to our website and access. Subsequently, we must as a country make sure that these things happen. In Ghana, Liberia, Gambia and a lot other very small countries you can actually click on a website and see these information but it is not so in Nigeria.”

Notwithstanding these challenges, Ahmed stated that Nigeria was on course to be re-validated as an EITI-compliant country, having done well in domesticating and implementing EITI’s principles of transparency and accountability in her oil, gas and mining sectors.

“I am very positive that Nigeria will scale through validation. We have done a very extensive amount of work beyond any other EITI implementing country. Yes, it is not perfect but where we see shortcoming, we have tried the best possible way we can to partly meet the requirements.

"The new standards itself is actually fashioned towards the NEITI audit works, so I am sure that with this effort we started today, getting the cooperation and inputs of stakeholders, listening to ourselves and trying to fashion out how we can make corrections before January 2016 we will scale through validation,” she said.

On the failure of the National Assembly to debate on NEITI’s audit reports, as well as its impacts on Nigeria’s standing, Ahmed said: “It is disturbing for NEITI board and management. It is also not what the EITI expects. The EITI requires you to report, disseminate the report and then to remedy the lapses observed by the report.

"We have been able to carry it through a very extensive remediation programme that is planned but the positive outcomes are few.  There are positive outcomes but they are few. And that is because we do not have the full commitments of the relevant government agencies to this remedial process.

“So, we are seeing an opportunity in validation of flagging up these issues for people to understand the implications of not pushing and realising the results of the remedial process."

Nigeria, which signed up to implement EITI in the oil, gas and mining industries in 2003, began implementation in 2004 and became the first country out of 46 nations in the world body to support the process with a specific Law, the NEITI Act of 2007.

The country was designated EITI-compliant in 2013. EITI-compliant countries are however required to undertake validation every three years. NEITI is to face the validation examination team in January 2016.