This Day (Lagos)

Nigeria: Russian, Chinese Oil Firms Jostle for Ogoni

Lagos — Russian oil giant, Gazprom, is among several foreign companies jostling to replace Royal Dutch Shell in Ogoniland following Federal Government's decision to award the oil fields to another company.

THISDAY was also informed that many Chinese companies have indicated interest in the oil fields, which hold proven reserves of over 10 trillion cubic metres of gas - one of the world's largest.

President Umaru Musa Yar'Adua had announced over a week ago that oil fields abandoned by Shell in Ogoniland 15 years ago would be given to another oil company this year - a decision, THISDAY learnt, may soon be challenged in court by Shell.

However, Section 25 (1) (a) of the 1969 Petroleum Act empowers the government to take over and re-award oil fields that are inactive.

THISDAY was informed last night that following government's six-month quit notice to Shell, the oil giant is planning to farm out the fields to Addax Petroleum, a Canadian company, in order to prove that they are not dormant.

Yar'Adua's decision to give up the fields to another company was said to be informed by his desire to address the power situation in the country through the use of gas to generate electricity. Gas is one of the cleanest sources of power.

In line with the policy of the Yar'Adua administration to involve host communities in the ownership of oil fields in order to address the issue of marginalisation, THISDAY has learnt that there is intense mobilisation by the communities in preparation to take up equity in the ventures.

Any new company that gets the oil fields is expected to begin production within a year.

Gazprom, although not an oil company, is said to be interested in gas production in which it has global acclaim.

Gazprom is the largest extractor of natural gas in the world, accounting for about 93 percent of Russian natural gas production. With reserves of 28,800 cubic km, it controls 16 per cent of the world's gas reserves.

After acquiring the oil company Sibneft, Gazprom, with 119 billion barrels of reserves, ranks behind only Saudi Arabia, with 263 billion barrels, and Iran, with 133 billion barrels, as the world's biggest owner of oil and oil equivalent in natural gas.

Apart from its gas reserves and the world's longest pipeline network (150,000 km), it also controls assets in banking, insurance, media, construction and agriculture.

Shell is said to be preparing for a legal battle because even though it has not produced in Ogoniland since 1993, the proven reserves there is at the heart of the company's business interests.

Federal Government's withdrawal of the oil fields could affect Shell's market capitalisation and stocks, THISDAY can report.

Shell closed its operations in the area in 1993 as a result of protests over pollution and lack of development.

The protests were spearheaded by the Movement for the Survival of Ogoni People (MOSOP), whose leader Ken Saro-Wiwa was executed by the Abacha government in 1995.

"There is a total loss of confidence between Shell and Ogoni people," Yar'Adua said while on a state visit to South Africa recently.

"Another operator acceptable to the Ogonis will take over. Nobody is going to gain from the conflict and stalemate, so this is the best solution," he added.

The Nigerian National Petroleum Corporation (NNPC) had been named to take over the fields but it is yet unclear how the ownership will be structured if eventually a foreign company wins the fields.

It appears the NNPC may adopt the joint venture partnership structure.

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