Angola punished Shell in blocking OVL for Block 18

Vol 8, PW 17 (17 Nov 04) People & Policy

Whats the real story behind Angolas decision to block the acquisition by ONGC Videsh of a 50% stake in Block 18 from Shell In September, state-owned Sonangol blocked OVL by exercising its pre-emption rights over a May agreement between Shell and OVL.

Taken unawares, OVL was counting on the decades-long friendship between Angola and India to secure a foothold in West Africa, but to no avail. We now learn that OVL was the unintended victim of the Angolan governments fury against Shell.

Angola made this amply clear to India on the sidelines of the OPEC meeting on 14th September in Vienna when its oil minister told Mani Shankar Aiyar that Shell had violated the conditions of the agreement with the government over Block 18. One condition was that if any of the partners wanted to exit, they should seek the approval of the Angolan government, before it could even initiate the process of sale to a third party.

Aiyar was told that Shell broke this rule and set up a dataroom in the US without informing either Sonangol or the Angolan Ministry of Petroleum. Sonangol tried to send a message to Shell to stop the sale but Shell did not listen and went ahead.

After the sale was almost finalised, Shell asked OVL to inform the Angolan authorities. A furious Angolan government then decided to teach Shell a lesson by asking Sonangol to block the sale to OVL.

Aiyar was told that oil is the only weapon in the hands of Angola and they decided that to maintain their credibility over international oil companies, they would not let Shell sell its share to any third party. Aiyar was surprised and replied that neither he nor OVL were aware that Shell had violated any agreement with Angolan authorities.

Aiyar supported Angolas position against Shell, but requested that OVL should be given 50% share of the block after the pre-emption something the Angolans eventually refused.