Shell loses oil license to NNPC in court ruling as state oil giant warns against lawsuit

Chike Olisah by Chike Olisah

Royal Dutch Shell Plc’s Nigerian subsidiary, Shell Petroleum Development Company (SPDC) has lost the right to operate an oil field after a court ruled the company wasn’t entitled to renew a lease first granted in 1989.

This follows the judgement by the Court of Appeal in Abuja on Monday, which upturned a 2019 ruling that granted SPDC the right to renew its operating license for the Oil Mineral Lease 11 (OML 11) field and transferred those rights to the state-owned Nigerian National Petroleum Corporation (NNPC).

NNPC hailed the judgement by the Court of Appeal which affirmed its ownership of OML 11 in Ogoniland describing it as a huge victory and beginning of moves to address decades of restiveness in the host community of the oil field.

What NNPC is saying
The Group Managing Director of NNPC, Mele Kyari, in a statement said, “This is a huge victory for the government and people of Nigeria as we now have the impetus to responsibly unlock the oil and gas reserves the block offers for the benefit of all Nigerians.’’

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Kyari further warned that any legal action by Shell would be futile given the company’s inability to work on the Ogoni region of the block for over 30 years.

NNPC in its statement said that its subsidiary, the Nigerian Petroleum Development Company (NPDC) has already taken over the assets and operations are in full gear adding that the company is working closely with stakeholders and partners to achieve a new vision of responsible, smart engineering and environmental sustainability that the federal government has endorsed for the OML 11.

What Shell is saying
According to Bloomberg, Shell, however, through a statement by its spokesperson expressed disappointment over the judgment and subsequently filed an appeal.

Shell in its statement said, “Though we believe the SPDC JV has fulfilled its obligations under the Petroleum Act for the renewal of OML 11, our preference remains to engage the Nigerian authorities on available options for an amicable resolution of issues around the lease.’’

The decision comes just as Shell agreed to pay a local community $111 million in a decades-old oil spill dispute related to OML 11. Shell faces lawsuits from Nigeria to Europe claiming environmental damages in the Niger Delta.

This new development is coming at a time Shell has announced the commencement of the process of divesting from its onshore operations in Nigeria because it is no longer compatible with the company’s long-term climate strategy and also due to host communities; restiveness.

What you should know
Shell, which is the operator of the Joint Venture (JV), had not produced a drop of crude oil from Ogoniland for several years and as such no revenue had accrued to the partners throughout this period due to the development.

It can be recalled that in 2019, President Muhammadu Buhari, through a letter signed by his late Chief of Staff, Abba Kyaari, ordered the NNPC, through the NPDC to take over the operatorship of the asset from SPDC.

OML 11 remains one of the most important oil blocks in Nigeria. Located in a swampy terrain, it has Port Harcourt in the northwest of the block, while the major yard and logistics base at Onne is sited by the Bonny River.