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President Goodluck
Jonathan’s recent decision to grant the Bayelsa State government’s
request for exclusive concession of oil derivation on nine offshore
deepwater oil fields, located in water depths beyond 200 metres
isobaths, appears an attempt to exhume the carcass buried more than
eight years ago.

The
Offshore/Onshore Oil Dichotomy Abolition Act (2004) abrogated this as
payment of 13 percent derivation to oil bearing states was applicable
only to crude oil produced in onshore locations (land) as well as
offshore locations within water depths of less than 200 metres isobaths.

The implication was
that revenues earned from oil produced from concessions located in
water depths beyond 200 metres isobaths were not to be subject to the
derivation principle.

Federal versus state governments

The 2001 dispute
between the federal government and the eight littoral states on
derivation formula in sharing offshore revenues cannot be forgotten in
a hurry.

To the federal
government then, the seaward boundary of each of the littoral states
was the low-water mark of the land surface of such state. As such, the
natural resources located within Nigeria’s continental shelf are not
derivable from any of the littoral states, making revenues from such
resources not subject to the derivation formula.

On the other hand,
the littoral states believed that their territory extends beyond the
low-water mark onto the territorial waters, as well as the continental
shelf and the exclusive economic zone (EEZ), and as such all natural
resources derived from both onshore and offshore locations within their
respective territory should be subject to the payment of “not less than
13 percent derivation”, as provided in the proviso to Section 162(2) of
the Constitution.

Dissatisfied, the
federal government went to the Supreme Court asking for “a
determination of the seaward boundary of a littoral state within the
Federal Republic of Nigeria for the purpose of calculating the amount
of revenue accruing to the Federation Account directly from any natural
resources derived from that State pursuant to section 162(2) of the
constitution of the Federal Republic of Nigeria 1999.”

Supreme Court judgment

The Supreme Court,
in its April 2002 judgment, declared that “the seaward boundary of a
littoral state within the Federal Republic of Nigeria for the purpose
of calculating the amount of revenue accruing to the Federation Account
directly from any natural resources derived from that state pursuant to
Section 162(2) of the Constitution of the Federal Republic of Nigeria
1999, is the low-water mark of the land surface thereof, or (if the
case so requires as in the Cross River State with an Archipelago of
Islands) the seaward limits of inland waters within the State.”

Besides, the
Olusegun Obasanjo administration had, in 2003, agreed with all the
littoral states governors that the “200 metres water depth isobaths” be
substituted for “continental shelf and exclusive economic zone.”

This followed
Obasanjo’s proposal that “contiguous zone” be equal to 24 nautical
miles from the coast, against the governors and the National Assembly’s
position that “continental shelf” should equal to 200 nautical miles
from the coast.

The implication of
the agreement was that all the country’s existing producing oil fields
are located within 200 metres water depth isobaths.

In other words,
except for Abo Field, operated by the Nigerian Agip Oil Company (NAOC),
virtually all commercial deep offshore oil concessions are located in
at least 1,000 metres of water depths.

However, the
concession to Bayelsa State government for attribution of nine oil
fields, ostensibly to assuage the “negative impact of the delimitation
of maritime boundaries of littoral states by the National Boundary
Commission (NBC) in the wake of the promulgation of the
Offshore/Onshore Dichotomy Abrogation Act”, appears to be in the breach.

The oil fields
include some of Nigeria’s biggest deep offshore oil concessions, like
the over 770 million barrels reserve Agbami (OPL 216), operated by
Chevron Nigeria Limited, located at about 1,345 metres of water depth;
the over 1.5 billion barrels reserve Bonga (OPL 212), operated by Shell
Nigeria Exploration and Production Company (SNEPCo), at more than 1,000
metres water depths, and the over 630million barrels reserve Akpo (OML
130), operated by Total, at over 1,325 metres water depths.

Others include the
60 million barrels reserve Chota oil field (OPL 220) by ConocoPhillips;
100 million barrels reserve N’Golo (OPL 219) by Elf Petroleum Nigeria;
Nnwa Doro oil field (OPL 218) by Statoil, and Aparo (OPL 213) by
Chevron, all located beyond water depths of 200 metres isobaths.

Allocation politics

What makes the
issues contentious is the significant alteration of the existing
Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) indices
for the payment of oil derivation.

Prior to the
concession and subsequent revision of the volume of oil production
figures attributable to each littoral state, Akwa Ibom topped, with
13,905,432 barrels, followed by Rivers (12,636,795 barrels), Delta
(11,163,493 barrels), with Bayelsa (10,313,368 barrels).

But, the reverse is
the case under the revised indices released since last July, with
Bayelsa State at the first position at 15,995,773 barrels, ahead of
Rivers (13,317,840 barrels), Akwa Ibom (12,796,954 barrels), and Delta
(11,163,493 barrels).

Chairman, House of
Representatives Committee on Rules and Business, Ita Enang, who was
involved in deliberations that gave birth to the Onshore/Offshore
Dichotomy Abolition Act, said in an interview on Friday that the
concession granted Bayelsa State is a clear infringement on the
provisions of that law, as no littoral state is entitled to derivation
on resources located in water depths beyond 200 meters isobaths.

“If the decision is
to be just and equitable, the law must be amended forthwith to extend
the prescribed limits of littoral states approved in the Act,” Mr.
Enang said.

“My conviction has always been that the issue of 200 metres water
depths isobaths was supposed to be the starting point, so that the
onshore/offshore dichotomy would ultimately be abolished completely.
Under such an arrangement, other states, including Akwa Ibom, Delta,
and Lagos, will also benefit,” he said.