Why OPL 245 controversy is not going away soon

In 1998 during the regime of Sanni Abacha, Dan Etete, oil minister allegedly awarded Oil Prospecting License 245 to himself and one of Abacha’s sons, Mohammed, through an incorporated vehicle, Malabu Oil and Gas, established only five days earlier.

Trouble started when president Obasanjo was elected president in 1999 and demanded an examination of the deal leading to intrigues. While much of this information is in the media, there are keys issues that have not featured in this high wire drama.

Reserve additions

OPL 245 is in the offshore waters of the Gulf of Guinea and covers 1,958 square kilometres. It encompasses two deep water oil fields, Zabazaba and Etan, at depths of between 1,500 and 2,000 metres respectively.

The field holds an estimated 9.23 billion probable barrels of crude oil which if confirmed would be equivalent to nearly one quarter of Nigeria’s total proven oil reserves. The implication is that if the field is fully developed, Nigeria’s current budget benchmark of 2.2million barrels, OPL 245 alone can provide all Nigeria’s oil production output for over 11 years.

Also if the reserves are proven, the estimated reserves in the fields would increase Shell’s proven global oil reserves by a 75 percent, and add nearly 50 per cent to Eni’s.

Investments prospects

There are fears by some analysts that the way OPL 245 saga has been handled will give investors little confidence to invest in Nigeria. However there are counter arguments about what attracts investors’ confidence.

Should a country short-change itself to attract investments? What price is it willing to pay? At what stage does national interest take pre-eminence over personal greed?

OPL 245 calls into question the business practice of multinational oil companies, does the size of the asset somehow validate an odorous transaction? The Malabu deal had a stench a mile away, yet some of the most respected energy giants fell into murky waters on account of it.

It will be 20 years next year since it license was awarded and over $1.2bn later, not a barrel has been lifted. Now oil prices have plateau, costs have increased and the oil acreage is under investigation.

Transparency laws

A legacy from Halliburton scandal and OPL 245 legal battle, both involving highly placed Nigerians led to introduction of the Dodd-Frank Act in the US, a legal provision that requires multinationals in US and some Europe countries to report payments made to national governments abroad. Global Witness, a transparency watchdog, says the financial laws have now been passed in the EU, US, Canada and Norway, covering 84 of world’s largest 100 oil and gas companies.

The US first passed the Dodd Frank Act in 2010, section 1504 of which requires companies to report payments to governments for oil, gas and minerals. The Securities and Exchange Commission (SEC) then set about drafting a rule that would detail the requirements for companies, and allow for implementation of the law.

In 2013, the EU passed similar legislation, the Transparency and Accounting Directives, which requires the disclosure of project-by-project payments to governments by extractive companies, including logging companies. All Member States are due to have now transposed these laws into their national legislative framework and the first company reports are due in the UK next year.

Concerns mount over the fate of the Act as United States President Donald Trump signed a directive calling for a review of its provisions.

President Trump’s directive affecting Dodd-Frank seeks to overhaul the core principles for regulating the financial system, including empowering American investors and enhancing the competitiveness of American companies.

By ISAAC ANYAOGU