FG Retrieves Controversial Malabu Oil Block

The Federal Govern­ment is tightening all the loose ends to en­sure a hitch-free im­plementation of wide-ranging reforms in the oil sector.Under the proposed new Petroleum Industry Bill (PIB), the government has retrieved the controversial Oil Processing License (OPL) 245, also known as Malabu Oil Block, from its owners and transferred it to a new company. The new company will be registered once the National Assembly passes the PIB and other oil sector reform-relat­ed bills. In three of the new bills, the Federal Government conferred the ownership of the oil block on the proposed Nige­rian Petroleum Assets Manage­ment Company.
Indeed, the government listed OPL 245 as part of the assets of the NNPC to be transferred to the Nigerian Petroleum Assets Management Company, as part of the ongoing reform as encapsulated in the new Petroleum Industry Legislative Frameworks before the House of Representatives.
The Malabu Oil Block is among the 26 major Oil Min­ing Licences and Oil Process­ing Licences (OPLs) assets to be transferred to the Nigeri­an Petroleum Assets Manage­ment Company, in the process of winding-down the Nigerian National Petroleum Corpora­tion (NNPC) and other entities.
The oil blocks are OML 123, OML 124, OPL 90, OPL 125, OPL 209, OPL 211, OPL 212, OPL 213, OPL 214, OPL 217 and OPL 218.
Others are OPL 219, OPL 220, OPL 211, OPL 222, OPL 242, OPL 244, OPL 245, OPL 247, OPL 256, OPL 318, OPL 320, OPL 322 and OPL 324.
Following claims and coun­ter-claims of the ownership of the Malabu Oil Block and the $1.1 billion scandal associated with it, the House of Represent­atives initiated an investigation into it.
The oil block covers a mas­sive area of 1,958 square kilo­metres with two deep water fields estimated to hold about 9.2 billion barrels of crude oil. The award of the oil block was allegedly shrouded in contro­versy, scandals, corruption and breach of due process that re­sulted to a monumental revenue loss to the country.
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According to the three new bills on the Petroleum Industry Legislative Framework, meas­ures to check revenue losses and militancy in the Niger Delta re­gion are highlighted.
The three bills are an Act to establish a Fiscal Framework that encourages further In­vestment in Petroleum Indus­try whilst Increasing Accruable Revenues to Federal Govern­ment of Nigeria; an Act of Le­gal and Regulatory Framework, Institutions and Regulatory Authorities as well as for the Op­erations of the Upstream and Downstream Sectors of the Ni­gerian Petroleum Industry; and an An Act for Legislative Frame­work Relating to Petroleum Producing Host Community Participation, Cost and Benefit Sharing amongst Government, Petroleum Exploration Compa­nies and Petroleum Host Com­munities and Matter’s Connect­ed Thereto.
The bills have been gazet­ted for Second Reading in the House of Representatives and with strong assurance of being passed before the end of first quarter of 2017.
Overall, the bills seek to de­regulate the downstream and upstream petroleum sectors and balkanise the NNPC to smaller entities including National Oil Company (NOC), the Nigerian Petroleum Assets Management Company, among others.
The legislative framework also seeks to enhance explora­tion and exploitation of petro­leum resources in Nigeria and to promote petroleum prod­ucts for the benefits of all Ni­gerians, significantly increase domestic gas supplies for pow­er GENERATION and industrial de­velopment.
It also seeks to create a commercially-viable National Oil Company, deregulate pe­troleum products prices, cre­ate efficient regulatory efficien­cy, transparency and openness through robust governance mechanism and promote the Nigerian content policy.
To ensure the effective take-off of the NOC, the bill allows the Ministry of Finance Incor­porated to acquire 51 percent while the Bureau of Public En­terprises (BPE) holds 49 per­cent of the initial shares of the company.
The two companies are to be managed and governed by the Companies and Allied Mat­ters Act and Securities and Ex­change Commission Codes of Corporate Governance.
In the Petroleum Host Community Legislative Frame­work, which provides for the establishment of Community Fund, the Federal Government is obligated to “pay directly to Local Governments’ accounts the amount for the benefits of the upstream petroleum communities within a local govern­ment”.
Ten percent of the total amount payable to a state gov­ernment by the Federal Govern­ment in accordance with the de­rivative formula as contained in the nation’s constitution and an additional “30 percent of royal­ties is to be paid by a compa­ny from petroleum production on land within the territory of an upstream petroleum com­munity.”
Similarly, “20 percent of an aggregate of the total royalties accruing to Federal Govern­ment for petroleum produc­tion is to be evenly divided by the number of local govern­ments with facility.”
The legislative framework also provides that “50 percent of the amount payable to the Fed­eral Government for pipeline right-of-way shall be PAID TO lo­cal government within pipeline communities are located, solely for the benefit of the people.