Nigeria and Bayelsa’s nine oil fields allocations

Oct 30, 2010 12:00 AM

by Adeola Yusuf

An array of criticisms is still trailing President Goodluck Jonathan’s allocation of nine mega offshore oil fields to Bayelsa State against the Supreme Court ruling on Onshore-Offshore Dichotomy Abrogation Act of 2004.

The concession now gives Bayelsa about 6 % out of the 13 % derivation to all oil producing states.

August 31, 2010 was, in the mind of many economists, the most remarkable in the anal of Yenogoa, the sleepy capital of Bayelsa State. Though the state, with just eight local government areas, was not created on the said date, it witnessed a “Presidential declaration,” which made it the richest oil producing state in the whole of West Africa sub region. On the morning of the August 31, President Goodluck Jonathan allocated nine mega offshore oil fields to Bayelsa State, his home state.

What materialised on this day, however, began on February 16, just eight days after Jonathan became the acting President. His successor in Bayelsa government house, Governor Timipre Sylva had in a letter addressed to the then Acting President requesting approval for the attribution of nine oil fields. Jonathan eventually stirred the hornet’s nest when he gave all the nine mega oil fields in contention to Bayelsa in a drama that has now attracted banters from analysts to the state with appellation as glory of all lands.

Bayelsa State can only lay claims to oil wells located within a radius of 200 km isobaths, says the Supreme Court in its ruling on offshore-onshore dichotomy. While analysts, one of them former member of House of Representatives Dr Junaidu Mohammed, described Jonathan’s action as illegal, other oil producing states threatened to take the President to court for flouting the constitution. Mohammed’s view was corroborated by a Kaduna based lawyer, Yahaya Mahmoud.

The allocation of additional nine oil wells to Bayelsa State was done in negation of the Supreme Court ruling on offshore-onshore dichotomy that states can only lay claims to oil wells located within a radius of 200 km isobaths, they said. The duo faulted the allocation of the oil wells to President Jonathan’s state of Bayelsa as having been done in breach of the constitution. “There is a Supreme Court ruling few years ago, which says a state could claim oil fields as part of its natural resources only when they are within its landmass confines or located in a neighbouring body of water or ocean not beyond 200-km isobaths from the landmass."

"Now, this issue of nine oil fields in neighbouring ocean of Bayelsa said to have been made another source of revenue to be taken into consideration by the Revenue Mobilization Allocation and Fiscal Commission (RMAFC) in its future 13 % derivation may not be acceptable because these fields are located beyond the ruling’s 200-km isobaths limit, because other neighbouring states are already saying it is illegal regardless of the commission’s endorsement,” Mahmoud said.

Mahmoud said the executive powers conferred on President Jonathan are limited to the constitutional provisions, which he swore to uphold along with all other defined laws of the land. “So long as it is the Constitution that provides that resources be shared appropriately based on laws by the National Assembly and accordingly interpreted by the Supreme Court, the President cannot act contrary to it. Therefore, the executive power is about being law-abiding and not being unruly,” he said. He said any state could take the matter to the Supreme Court for adjudication, on the ground that contrary to the constitutional sharing formula that every state should receive its share, the decision to allocate nine oil wells to Bayelsa state cannot stand scrutiny.

On his part, Junaidu said the allocation of the oil wells to Bayelsa State for the purposes of the 13 % derivation shows that the President is preoccupied with serving the interest of his own people. “This indicates Jonathan is only doing what he likes or what he is more concerned about, which is serving his own people, but constitutionally he doesn’t have any leverage to even attempt to do such outrageous things, which only the National Assembly is invested with such powers,” he said. He said the allocation to Bayelsa, which is one of three states that enjoy over 60 % of the nation’s oil revenues, would only impoverish other states.

“Those to suffer from Jonathan’s action are the states that are not blessed with oil. Even oil producing ones would in one way or the other also feel the pinch because there are three states that enjoy over 60 % of the nation’s oil revenue, and Bayelsa is one of them. This clearly shows that, it’s the rich getting richer at the expense of others, suggesting that the country is not truly a federation in terms of even distribution of its resources, therefore no considerations are given to sense of humility, honour and responsibility,” he said.

Junaidu dismissed claims that the allocation was predicated on some peculiar problems of Bayelsa, which President Jonathan had been agitating for since his days as governor of that state. “You mean any state could wake up and ask for allocation of an oil well and without following due process get it? Whatever we want to do must be within the legal and constitutional ambits. It means if I have problem I could make such ridiculous demand and get entertained?” he queried.

Meanwhile, the aggrieved oil-producing states stated the possibility of a legal fireworks as they are considering legal action over revelations that Bayelsa State is now to enjoy a special concession to receive extra derivative revenue from the nine mega offshore fields.

The special concession, which was described by a source close to the Attorney General of one of the states, was granted by Jonathan to ensure the state receives extra derivation revenue for offshore oil wells located beyond the 200-metre isobaths provided for in the derivation law. The aggrieved oil states are said to be unhappy about the development and gearing up to go to court.

Finance commissioners from oil-producing states met earlier in Abuja with agreement to explain to their respective state governors, the effects of the exclusive derivation concession right granted Bayelsa in an attempt to douse the tension over the controversial issue.

Their defence

Neither President Jonathan or any of his aides has publicly raised a point to refute the public outcry but Governor Timipre Sylva, the major beneficiary of the trend argued in a petition, which he submitted earlier to Jonathan that the fields should be allocated to Bayelsa “to assuage the negative impact of the delimitation of maritime boundaries of littoral states by the National Boundary Commission (NBC) in the light of the promulgation of the Offshore-Onshore Dichotomy Abrogation Act 2004.”

He listed the oil fields, which included some of the biggest deep oil concessions like the Agbami, operated by Chevron, with proven oil reserves of over 770 mm barrels; Bonga operated by Shell with proven reserves of over 1.5 bn barrels; and Akpo operated by Total with proven oil reserves of over 630 mm barrels. Sylva said the delimitation had put the state in a disadvantaged position in the allocation of revenue since 2004 and asked the president to consider the impact of the ecological damage to the state’s coastline.

No point

As persuasive as Slyva’s argument sounds, its proverbial basket does not hold water before staff of the RMAFC. This agency is a government’s formation, which is refrained from refuting the government’s position on issue but its management staff declared that President Jonathan acted illegally by granting a special concession to his native Bayelsa State to earn more from 13 % derivation enjoyed by mineral producing states.

The RMAFC employee, said: “What the President did was wrong and unconstitutional because before any concession can be granted, you need to amend the Onshore-Offshore Dichotomy Abrogation Act 2004 and it is only the National Assembly that can do that.” By implication, another source added: “The concession gives Bayelsa 6 % and this will deprive some non-oil producing states of revenue.” It would be recalled that on August 31, a Presidential concession on derivation was granted to Bayelsa to earn more oil revenue following a petition to the President by the state governor, Sylva on February 16, alleging denial of revenue to his state. Analysts said such move was a breach of the derivation principle by President Jonathan which will make Bayelsa the richest oil state in the country.

The concession allows Bayelsa to receive extra derivation revenue for offshore on the nine oil wells located beyond the 200-metre isobaths on grounds of ecological damage to the state from the operation of those oil wells.

Implication of concession

The concession was granted because of “the environmental impact of the activities of oil exploitation as well as the security implications borne by the operations of the exploration companies (operating the nine oil wells) deal devastating effect on Bayelsa State.”

Based on the concession and the revised 13 % derivation indices for July, Bayelsa State is ahead of others with 15,995,773 bbl. It is followed by Rivers State (13,317,840 bbl), Akwa Ibom State (12,796,954 bbl) and Delta (11,163,493 bbl). Akwa Ibom had the highest before the concession and subsequent revision of the volume of oil production to each state. This was followed by Rivers State, 12,636,795 bbl; Delta State, 11,163,493 and Bayelsa State, 10,313,368 bbl. Expectedly, this concession could trigger a spate of more court actions and constitutional crises.

Mohammed had argued that the exclusive concession to Bayelsa to enable it to earn more derivation revenue is in breach of the Act of the National Assembly that abrogated the onshore-offshore dichotomy in the application of the 13 % derivation principle. He said this could lead to agitation and court action by other states such as Lagos State which also has oil wells located beyond the 200-metre isobaths in waters within their boundaries. If the concession is implemented, net revenue that would be available to the Federation Account for distribution to the three tiers of governments would be reduced. Revenues from oil wells outside the statutorily allowed 200-metre isobaths did not form part of derivation calculation in the law that ended the onshore-offshore dichotomy. Such revenues were pooled and shared to all the federating units based on the prescribed revenue formula.

Marginal fields’ allocation

The Federal Government earlier shifted the date for marginal oil field bidding rounds, stating that the bid would now take place before December, but analysts are now of the opinion that the bid may be enveloped with controversies. Minister of Petroleum Resources, Diezani Alison-Madueke, who had earlier said that the bid would come up on or before August stated that the government would now do the bidding round before the end of 2010. The minister changed the date in her address at a meeting of the Organisation of Petroleum Exporting Countries (OPEC) in Vienna, Austria. According to a statement by Group General Manager, Group Public Affairs Division of the Nigerian National Petroleum Corporation (NNPC), Alison-Madueke, expressed the belief that the marginal field oil bidding licenses round would open up more vistas for marginal field operators.

Following the smooth passage of the Nigerian Content Act, the Federal Government appears set to conduct the next marginal field allocation programme to indigenous exploration and production companies in Nigeria. This move is targeted at ensuring full indigenous participation in the oil exploration business and indigenous operators were advised to start putting their bid packages together in readiness for the rounds.

This comes as indications become clear that the disputed Petroleum Industry Bill (PIB) is set for passage following harmonisation of contributions and resolution of issues between the government and multinational operators in the industry. Presidential Adviser on Petroleum Matters, Dr Emmanuel Egbogah, who made the clarifications in Calabar, Cross River State, said that the next marginal field allocation programme for the indigenous companies was imminent.

Resolution

It is without mincing words necessary for the President to channel the course for reduction in the country’s, nay states’ dependence on oil instead of creating bad blood among states with oil fields’ allocation. Many world economists, among who is Philip Emeagwali, a Nigerian, are advocates of this position. Emeagwali has been called “a father of the Internet” by CNN and TIME, and extolled as a “Digital Giant” by BBC and as “one of the great minds of the Information Age” by former US President Bill Clinton.

In an article entitled: “Oil Tanks Exhausted, Think Tanks Needed,” the winner of 1989 Gordon Bell Prize, the Nobel Prize of supercomputing, for reprogramming 65,000 sub-computers as an internet that helps recover more oil said, “Should Nigeria migrate from oil to soil, as is often suggested. I think not. It should leapfrog into the Information Age. Nigeria cannot return to an agricultural age because the West is being urbanised, the East is being eroded, and the North is being desertified.” A Nigeria without oil, he said, must make the transition to a knowledge-based economy.

Nollywood can redefine 21st century Africa as the continent of arts and innovation. He said: “If Nigerians have an average of three children per couple, it will become the world’s third most populous nation in 50 years. It will lag behind China and India, but will have a greater population density. Where will we find farmland? My grandfather’s farmland was located where Onitsha market now lies. For countless centuries, my Igbo ancestors were farmers. Sons walked in their father’s footsteps, ploughing the same land. Their life expectancy was about 37 years." “Daughters married early, had as many children as they could, and became young widows. My mother married days after her 14th birthday and gave birth to me six days after her 15th birthday. She was born in colonial Africa, where she counted her age on her fingers and toes and by her age-grade affiliation. Yet she had a son who could count the ages of humanity on his supercomputer, which occupies the space of four tennis courts. Her son’s supercomputer computes and communicates as an internet and sends and receives answers via e-mails to and from 65,000 subcomputers."“My father and I, followed by my son, broke the tradition of walking in our ancestors’ footsteps. My father was a nurse, and my son and I are computer scientists. All three of us abandoned the soil to work in knowledge-based industries."

Bayelsa in focus

Bayelsa State is a state in southern Nigeria in the core Niger Delta region, between Delta State and Rivers State. Its capital is Yenagoa. The language spoken here is Ijaw language and dialects of the Ijaw language such as Nembe, Atissa, Akassa, Ogbia, etc. However, like the rest of Nigeria, English is the official language. The state was created in 1996 from part of old Rivers State and thus, it is one of the newest states of the Nigerian federation. Bayelsa State has one of the largest crude oil and natural gas deposits in Nigeria. As a result, petroleum production is extensive in the state. However, the majority of Bayelsans live in abject poverty. They are mainly rural dwellers due to its peculiar terrain and lack of adequate transportation, health, education or other infrastructure as a result of decades of neglect by the central governments, state governments, and petroleum prospecting companies. This has been a large problem in the state since its creation and successive state governments have not been able to address and repair the issue. The state, as a result, has an almost non-existent commerce. Successive state governments have, however, embarked on various industrial projects (even venturing into the oil and gas sector), and “poverty-alleviation” programmes to reverse this situation, accordingly these are only on paper. There is nothing on ground to show for huge sums of money spent for development by successive and present state governments. The local population engage in fishing on a subsistence and at times, commercial level. The Bayelsa State government is otherwise the main employer of labour in the state.

Geography

Bayelsa has a riverine and estuarine setting. A lot of her communities are almost (and in some cases) completely surrounded by water, hence making these communities inaccessible by road. The state is home to the Edumanom Forest Reserve, which in June 2008 was the last known site for chimpanzees in the Niger Delta. Other important cities besides Yenagoa include Akassa, Amassoma (the home of the Niger Delta University), Twon-Brass, Kaiama, Nembe, Odi, Ogbia, Okpoma, Oporoma and Sagbama. Notable sons of Bayelsa State include veteran novelist and poet, Gabriel Okara; pioneering Nigerian journalist and pre-independent freedom fighter, Ernest Ikoli; Nigerian Civil War hero, Major Isaac Adaka Boro (Nigerian Army) and Canadian Olympic gold medallist/ world wrestling champion, Daniel Igali; and National Team footballer and Olympic & Under 20 coach, Samson Siasia. Others include: revolutionaries and martyrs of April 22, 1990 Captains Perebo Dakolo and Harley Empere (Nigerian Army); former Governor of Rivers State, HRM Alfred Diete-Spiff (now king of the city of Twon-Brass, Nigeria); and the current President of Nigeria, Goodluck Jonathan. Due to massive overseas scholarship programmes implemented by the old Rivers State in the 1970s and recent Bayelsa State governments, large numbers of Bayelsan professionals reside in Europe and North America. This is part of the general brain-drain trend affecting many African communities.

On administrative divisions, Bayelsa is divided into eight Local Government Areas: Brass, Ekeremor, Kolokuma/Opokuma, Nembe, Ogbia, Sagbama, Southern Ijaw and Yenagoa.

Last line

A round table among the oil producing states is required to jaw-jaw instead of war-war. While the President has the power to allocate oil field to deserving states, corporate or individual entities that meet requirements, the need to follow due process on this cannot be overlooked. He should speak out on this allocation, considered to be illegal by many, to douse the rising criticisms from degenerating to tension in the country.

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