Senate seeks $200m refund from Shell over joint venture breach

June 22, 2022 Mary

The Nigerian Senate has constituted an ad-hoc committee to investigate Shell Petroleum Development Company (SPDC) over an alleged non-compliance with the Petroleum Industry Act (PIA) and breach of the Joint Venture Agreement entered into with the Federal Government.

The ad-hoc committee was on Wednesday mandated to probe the Oil Mining Lease granted to SPDC between 1959 to 1989, and 1989 to 2019 under the SPDC/NNPC Joint Venture agreement.

The committee constituted by the Senate president, Ahmad Lawan, has Aliyu Sabi Abdullahi as its chairman.

Other senators appointed as members of the panel include George Thompson Sekibo, Abdullahi Yahaya, Bassey Albert Akpan, Olamilekan Solomon Adeola, Smart Adeyemi and Aishatu Dahiru Ahmed.

The Senate consequently demanded a refund of $200 million or any amount short of what was paid by SPDC, including penalties and interests under the said lease agreements to the coffers of the Federal Government.

The resolution was reached by the chamber after it considered a motion sponsored by George Thompson Sekibo, a PDP senator from Rivers East.

The motion was titled, “non-payment of $200,000,000 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 observed that the SPDC/NNPC Joint Venture (JV) agreement, in contravention of 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.

He observed 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.

According to the lawmaker, “upon the expiration of the initial Oil Mining Lease in 1989, SPDC/NNPC JV, was granted another 30-year Oil Mining Lease again from July 1, 1989, to June 30, 2019, by the Ministry of Petroleum Resource/DPR instead of the 20 years lease period prescribed by the Petroleum Act, which is contrary to paragraph 10 of the First Schedule to the said Act”.

He disclosed that in the initial additional 10 years Oil Mining Lease of 1969 to 1989, illegally granted to the SPDC/NNPC JV by the Ministry of Petroleum Resources/DPR, the Federal Government lost from fees, taxes, rents and royalties the sum of $120, 000, 000.

He stated that in the second instance of the extra 10 years the Federal Government also lost a further sum of $80,000,000, making total of $200,000,000.

He noted that a loss of $200,000,000, which is equivalent to N83, 130, 000, 000 billion, could have been of great value to the economy of the nation.

He observed that the illegal action by the Ministry of Petroleum Resources/DPR as regards the SPDC/NNPC JV may not be the only non-compliant grant as details of other Joint Venture agreements with: Chevron Nigeria Limited, ENI Joint Venture, EXXON Mobil Upstream JV, Total E & P Nigeria Limited JV, need to be ascertained through a thorough investigation to verify compliance with the provisions of the extant law.

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 informed the chamber that SPDC went to Court to clarify the lease period, but the judgment was not in their favour as regards the additional 10 years lease period in the two instances.

“Regrettably, the court failed to order the SPDC to pay the arrears the 20 years lease period to the tune of $200,000,000 to the Federal Government for the illegal extensions”, he said.

The lawmaker further disclosed that a whistle-blower petitioned the EFCC on the need to recover the sum of $200,000,000 from SPDC for these 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.

He emphasised that the constitution also gives power to the National Assembly to carry out appropriate investigation on the observed misapplication of the laws enacted by the National Assembly, as provided in Section 88 of the constitution.

He stated further that Section 89 of the same constitution provides for how such investigation should be carried out.

Accordingly, the Senate resolved to constitute an ad-hoc committee to investigate the non-compliance with the Petroleum Act and the Oil Mining Lease granted to SPDC between 1959 to 1989, and 1989 to 2019 under the SPDC/NNPC Joint Venture Agreement; and compel SPDC to refund to the Federal Government the sum of $200,000,000 or any amount short of what was paid, including penalties and interests under the said lease agreement.