Three of Nigeria’s states are grappling over a newly-developed oil field that would bring the winner a much-needed boost in tax revenues.
While the dispute concerns less than 3 per cent of the country’s crude production of over 2m barrels of oil a day, establishing control could make a big difference to the cash flows of the states involved – and their political patrons.
On August 30, president Goodluck Jonathan flew by helicopter to Aguleri Otu in Anambra state, in south-east Nigeria, to commission the construction of the country’s first privately-owned refinery and declare Anambra Nigeria’s tenth oil-producing state.
Hours into the festivities, two bordering states, Kogi and Enugu, issued public statements claiming that the oilfields, OPL 915 and OPL916, are on their turf.
Kogi’s governor Idris Wada was quoted as saying “the oil wells that will service the refinery are in Odeke Community in Ibaji Local Government Area of the state.”
The oil blocs are leased to Orient Petroleum Resources, an indigenous company which expects its refinery to be built by 2013. Emeka Ayaoku, chairman Orient, said though the blocs are spread across Delta, Edo,Enugu and Kogi states, “the bulk of it is in Anambra.”
Orient Petroleum has told investors both oilfields have reserves of one billion barrels of oil and 30 trillion cubic feet of gas. The expected future output is 55,000 barrels per day.
Crude exports accounts for 95 per cent of Nigeria’s foreign exchange income and 80 per cent of the country’s entire revenue from exports annually. The state-owned oil company estimates Nigeria raked in $196bn in oil and gas sales in four years up to 2010.
“If you become an oil-producing state there is clearly a boost in terms of fiscal revenue, as most of these states do not generate much internally. Any revenue will be welcome, and could create some tensions locally,” Samir Gadio, an analyst at Standard Bank, London told beyondbrics.
Apart from the pool of oil revenue which is shared among the federal, state and local governments, the oil-producing states get an extra allocation from a so-called 13 per cent derivation fund. In March, the funds shared between nine states was N650.2bn, about $4bn.
Kogi State is upfront in its claim.
Jacob Edi, the government’s spokesperson told beyondbrics that: “Naturally, anywhere there is oil these kinds of agitations are inevitable. They are laying claims to what originally belongs to Kogi.”
Edi adds that the states have a pending case before the national boundary commission, and that Anambra should have awaited a verdict before “waking up to say they are an oil-producing state.”
Sources close to the government told beyondbrics that Kogi’s case with Anambra is of interest to two foreign exploration firms, who have signified an interest in doing business with the central Nigerian state.
Oil well disputes are common in Nigeria; in August Cross River state ceased to be an oil-producing one when a court decided Akwa Ibom owned the 76 offshore oil wells in dispute. Akwa Ibom, won, and is now demanding N18.4 billion in refunds from Cross River.
Akwa Ibom in turn lost 86 oil wells to major producer Rivers State in 2011, which received N10bn worth of refunds in revenue after the court case.
Edi expects a similar precedent when the boundaries are decided between the states.
“Then, we will know who owns what and gets what,” he says
Source: FT
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