Joint Venture violation: Fresh trouble for Shell as Senate orders refund of $200m

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Abimbola Abatta

There is fresh trouble for the Shell Petroleum Development Company (SPDC) operations in Nigeria as the Senate gave directive for the refund of $200 million to the Federal Government over the alleged violation of a Joint Venture (JV) agreement.

Nigerian NewsDirect reports that, in a similar development, Shell had been mandated, last year, to pay $111m in damages for 1970s oil spill in the Niger Delta region.

A Dutch court had ruled that Shell had polluted the Niger Delta and ordered the energy giant to compensate communities in the oil-producing Ogoniland part of Nigeria for the pollution.

While Shell agreed to pay the compensation, the energy company maintained that the spills were caused by third parties during the civil war in Nigeria

Another fresh trouble for Shell follows the directive of the Senate on Wednesday for the refund of $200million and  constituted an Ad Hoc Committee to probe Shell for its non-compliance with the Petroleum Act and violation of Joint Venture Agreement entered in with the Federal Government.

Constituted by the Senate President Ahmad Lawan, the Ad Hoc committee is chaired bySen. Sabi Abdullahi (APC- Niger) while other members include Senators George Thompson Sekibo, (PDP-Rivers) Abdullahi Yahaya, (PDP-Kebbi) Bassey Albert Akpan, (PDP-Akwa Ibom) Solomon Adeola, (APC-Lagos) Smart Adeyemi(APC-Kogi) and Aishatu Ahmed. (APC-Adamawa).

The committee would investigate the Oil Mining Leases (OMLs) granted to SPDC between 1959 to 1989 and 1989 to 2019 under the SPDC and NNPC Joint Venture agreement.

The resolution was reached after the Senate considered and adopted a motion sponsored by Senator George Sekibo (PDP, Rivers East).

The motion was entitled: “Non payment of the sum of 200 million dollars accruals from the Oil Mining Lease (OML), by Shell Petroleum Development Company of Nigeria Limited under the SPDC/NNPC Joint Venture Agreement and, illegal and unlawful renewal of Oil Mining Leases by the Ministry of Petroleum Resources/Department of Petroleum Resources (DPR) contrary to the provision of paragraph 10 of the First Schedule to the Petroleum Act 1969 (now Section 86(1) and 86(6) of the Petroleum Industry Act 2022.”

In his presentation, Sekibo advanced that the Joint Venture (JV) agreement contravened the provisions of the Petroleum Act 1969, by the defunct Department of Petroleum Resources (DPR) and the Ministry of Petroleum Resources, granted to the SPDC, NNPC a 30-year Oil Mining Lease from 1959 to 1989.

The Senator revealed that doing so constituted an illegal extension of the Oil Mining Lease by 10 years in the first instance, instead of the prescribed term of 20 years, without recourse to the provisions of the Petroleum Act 1969 in paragraph 10 of the First Schedule.

In his words, “Upon the expiration of the initial Oil Mining Lease in 1989, SPDC and NNPC JV, was granted another 30-year Oil Mining Lease again from 1st July 1989 to 30th June, 2019, by the Ministry of Petroleum and DPR instead of the 20 years lease prescribed by the Petroleum Act, which is contrary to paragraph 10 of the First Schedule to the said act.”

He observed that in the initial additional 10 years Oil Mining Lease of 1969 to 1989, illegally granted to the SPDC and NNPC JV by the Ministry of Petroleum Resources and DPR, the Federal Government lost the sum of 120 million dollars from fees, taxes, rents and royalties.

He stated that in the second instance of the extra 10 years the Federal Government also lost a further sum of 80 million dollars, amounting to a total of 200 million dollars.

According to him, the loss of 200 million dollars, which was equivalent to N83.130 billion, could have been of great value to the economy of the nation.

He expressed worry that the trend of illegal extension of Joint Venture (JV) period from 20 years to 30 years lease period without recourse to the Petroleum Act may have also applied to other Joint Venture agreements with the International Oil Companies (IOCs) and need to be investigated.

Sekibo further disclosed that a whistle-blower petitioned the EFCC on the need to recover the fund from SPDC for the illegal extensions by the Ministry of Petroleum Resources, DPR and to further investigate all other Joint Venture agreements that involved the aforementioned IOCs.

He noted that the power to make laws for the Federation as vested in the National Assembly by the Constitution also encompasses the power to make laws for the promotion of national prosperity and a dynamic self-reliant economy as provided in section 16(1)(a) of the 1999 Constitution of the Federal Republic of Nigeria as amended.

The lawmaker stated that the Constitution also empowers the National Assembly to carry out appropriate investigation on misapplication of the laws enacted by the National Assembly, as provided in Section 88 of the Constitution.

He added that Section 89 of the same Constitution provides the process on how such investigation should be carried out.

Consequently, the Senate demanded a refund of the said amount ($200,000,000), or any amount short of what was paid by SPDC, including penalties and interests under the said lease agreement to the coffers of the Federal Government.

Following the court’s ruling, some analysts had opined that the development may be responsible for Shell’s recent divestment.

Meanwhile, efforts to reach the Shell’s spokesperson, Bamidele Odugbesan, for reaction at the time of filing this report proved abortive.