Nigeria to Pull Shell Ogoni License

AMSTERDAM Sep 22, 2006 (Dow Jones Newswires) The Nigerian government will revoke Royal Dutch Shell PLC's (RDSB.LN) oil license in the country's Ogoniland, although the timing hasn't been officially set, a Nigerian oil official said Friday.

"We are going to revoke Shell's license to operate in Ogoniland," Bamibele Ogedenjbe, an assistant director at the Nigeria Department of Petroleum Resources, told reporters on the sideline of an energy conference here. DPR oversees the permitting of Nigeria's hydrocarbon licenses.

The reason for the West African country's planned revocation of Shell's drilling rights in Ogoni "is the inactivity by Shell to do anything with its license," Ogedenjbe said.

Shell stopped operating in Ogoniland in 1993 after the company was hit by a storm of protests by locals over its operations in the area, in the Western Niger Delta. Most of Nigeria's oil is produced in the delta.

"They (Shell) have no future plans for the license. We hope we can attract other investors who do have plans for the license," said Ogedenjbe, adding she didn't know the precise timeframe of when the license would be pulled.

Ogedenjbe's comments are symptomatic of other recent moves in countries, such as India, where governments have yanked licenses from oil companies for not fulfilling drilling requirements covered by contracts.

Shell has one license consisting of seven to eight oil fields in Ogoni, an area that drew international headlines in the mid-1990s after writer Ken Saro-Wiwa and eight other activists from his Ogoni tribe were executed under the regime of dictator Gen. Sani Abacha.

Shell remains the biggest international oil company in Nigeria, even after it halted operations in Ogoni.

Shell said Friday it believed negotiations with the government on the licensing matter were ongoing, as Nigeria reviews many oil licenses ahead of the country's next oil-licensing round planned for October.

"As far as we are aware, there are many options that are still being considered," Shell spokeswoman Eurwen Thomas said.

Officials at Nigeria's oil ministry and Department of Petroleum Resources couldn't be reached for additional comment.

Thomas said Shell's production in Ogoni when it pulled out of the area in 1993 was about 28,000 barrels a day, or 3% of Shell's total daily output in Nigeria at that time.

Analysts Unconcerned

Some analysts downplayed the financial significance of Shell's drilling rights in Ogoni.

"They haven't been operating there since 1993, so it's been inactive for a while there," said Oswald Clint, a London-based energy analyst at Sanford Bernstein.

Shell has actually benefited by not producing at onshore areas like Ogoni because it has to pay higher taxes and royalties for onshore production compared with offshore areas, where contract terms are more favorable, Clint said.

"The less they drill onshore the more stable" Shell's revenue and profits are from Nigeria, Clint said.

Shell's stock traded down 21 pence, or 1.21%, at GBP17.13 in London at 1542 GMT Friday.

Earlier this week, Nigerian Oil Minister and OPEC President Edmund Daukoru said Shell's return to Ogoni might still be on the cards.

"We have to look at this, and we hope it would happen, but if not, we need to find an alternative situation," Daukoru told Dow Jones Newswires.

Still Delicate Issue

Even though Shell quit operating in Ogoni years ago, Daukoru said the issue of whether it would return remains "very delicate for me to talk about."

If Shell doesn't return, Daukoru said development of the area's oil resources by a third-party contractor who is deemed acceptable by Shell might be a suitable option.

Some people familiar with the matter have said recently that the government had demanded Shell pay four times more for the license in order to maintain it.

Ogedenjbe declined to comment on whether the government had sought more money from Shell for the license, but said, "There was no financial reason to revoke."

The execution of Saro-Wiwa and eight other activists from his Ogoni tribe focused an international spotlight on the struggle between many local communities in Nigeria and the foreign oil companies operating there.

The Abacha regime executed Saro-Wiwa and other Ogoni activists officially on accusations that they murdered four political rivals, but Saro-Wiwa's supporters said he was targeted because he led environmental protests against Shell.

Ledum Mitee, president of the Movement for the Survival of Ogoni People, or Mosop, told Dow Jones Newswires earlier this week that locals would allow oil production to resume much sooner in Ogoni if Shell was no longer the operator. Ill feelings by locals toward the company continue, he said.

"It will take a lot more to sell to the people," if Shell is the operator, Mitee said.

Shell has made efforts for years to reconcile with the Ogoni people over issues such as oil-spill accidents. The company has operated a number of community-development projects.

Copyright (c) 2006 Dow Jones & Company, Inc.

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