Chika Amanze-Nwachuku
17 June 2008
Lagos — President Umaru Musa Yar'Adua has directed the Director of Petroleum Resources (DPR), Mr. Tony Chukwueke, to proceed on compulsory leave to avoid interference with the ongoing investigation into the award of oil blocks by the regulatory body.
The Federal Government has already directed the investigation committee to review the 2005 bid round, with a view to ascertaining whether due process was followed or not.
Following Chukwueke's suspension, Mr. Sabonberi Aliyu, Head of Administration, has been appointed as the acting Director.
The Federal Government had in June last year set up an investigation panel to the review the 2007 bid round, following the wide-spread criticism that greeted the exercise which was conducted in the twilight of former President Olusegun Obasanjo's regime.
Some industry operators and stakeholders had alleged that the DPR did not follow due process in the manner it conducted the bid round.
The grouse of some of them was what they described as "the indiscriminate award of special privilege of the Right of First Refusal (RoFR) to some companies."
They had complained that some beneficiaries of the RoFR were companies whose "antecedents and credentials are highly questionable" while some of the foreign companies granted the preemptive rights were said to be financially distressed, and might not actualise any development project in Nigeria.
Besides, the stakeholders were aggrieved that some companies that did not comply with the revised guidelines for the 2007 licensing round were allowed to participate in the bid round and were even awarded some blocks.
The guidelines stipulated that participants must pay registration fee, processing and prying fees.
However, some companies were said to have paid only the registration fee.
The team constituted last June was said to have submitted its report to the presidency in August last year and noted that there were irregularities in the manner the exercise was conducted.
For instance, the review team was said to have discovered $330,000 discripancy, which had arisen from the payment of the participation fees.
Sequel to this, the probe team was said to have indicted the DPR in its report and recommended that the authorities be sanctioned for the alleged irregulaties.
President Yar'Adua, who received the report in August last year, was said to have passed it on to the Minister of State for Petroleum, Odein Ajumogobia (SAN), to study and then make comments.
However, almost a year after the report was submitted, and more than one year after the blocks were awarded, winners of the blocks were said to have petitioned the President complaining about the delay in the signing of the Production Sharing Contract (PSC).
They had complained that the loans taken from banks were yielding high interests, whereas the PSC had not been signed.
The Presidency was said to have directed that the signing of the PSC be put on hold pending the completion of the probe.
But dissatisfied with the findings by the initial panel, and coupled with more petitions from stakeholders, the Federal Government constituted another team to revisit the exercise.
THISDAY reliably learnt that the latest probe would also cover the 2005 and 2006 bid rounds.
Determined to establish the fact about the matter, the Presidency on Friday directed Chukwueke, the DPR helmsman, to proceed on compulsory leave in order to avoid interference with the investigation.
An industry official said yesterday that the initial probe team did not dispute the fact that about $502 million was realised from the 2007 bid round.
They were also said to have established that the country raked in over $2 billion in the 2006 and 2007 bid rounds.
Commenting further, he said the government believed that Chukwueke is highly influential in the industry and that his continued stay in the office, while the investigation is ongoing, could hamper the team's work.
He stated that what is going on is simply a financial audit of the 2007 bid-round, adding that the DPR could not have compelled companies that had registered for the bid round to pay processing and prying fees.
Some aggrieved stakeholders had a few days before the 2007 bid round called on the government to suspend the exercise, alleging that due process might not have been followed.
For example, the stakeholders had noted that some of the beneficiaries were granted the RoFR on mere promises that they would carry out downstream projects in Nigeria, adding that no meaningful financial commitments have been made by them to either revamp the railways or the refineries or even build new ones.
"As a result of a promise to make the necessary investment, ONGC/Mittal of India was allocated 2 blocks OPL279 and OPL 285 in 2005, on the basis that they would invest $6 billion in a 180,000 bpd Greenfield refinery, and in addition would construct a 2000MW IPP and a brand new railway from the East to the West of Nigeria. Eighteen months later, ONGC is yet to make a kobo investment in Nigeria .
"CCPC and CHOOC are part of the vast empire of State Owned Enterprises (SOEs) of the Chinese Government. Development experts have serious reservation on the Chinese - they make long promises but are short on delivery. As an instance, for long the Chinese have promised to takeover the Kaduna Refinery, they kept dilly-dallying over the takeover for so many years. Despite benefiting from over a pay out of over $1 billion for the Nigerian Railways, the Nigerian rail system is still in a quandary. Offering the Right of First Refusal to these Chinese SOEs is like offering another round of opportunities to take Nigeria for a ride," the operators had said in a statement to sent to THISDAY a few weeks before the 2007 bid round.
A member of the House of Representatives Committee currently probing the activities of the Nigerian National Petroleum Corporation (NNPC) and other parastatals in the oil sector recently claimed that the committee had uncovered breach of due process in the conduct of the 2006 and 2007 bid rounds of oil blocs allocations.
The committee member, Hon. Igo Aguma, said the discovery was made in the course of data collation by the committee while preparing for public hearing on the activities of the DPR.
He said the committee was now in the process of prying further into the unwholesome practice with a view to determining who the perpetrators are, adding that the probe team would want to find out why certain companies and organisations bypassed due process and were still awarded oil blocks.
But DPR had in the wake of the widespread criticisms maintained that due process was followed in all the bid rounds.
An official of the agency had told THISDAY that prior to 1999, the award of oil blocks was something that was done more or less under the table in a discretionary manner.
He said the government used to give out the blocks to traditional players (International Oil Companies), political associates or cronies who then paid on negotiated basis. The implication, according to him, was that both the giver and taker actually did not know the value of the blocks.
"What some of these beneficiaries were doing was to get these blocks at giveaway prices and thereafter sell them at higher rates. For example, a block could be obtained for N20 million, and then sold for N64 million, or even billions of naira as the case might be. It was sequel to this under valuation that prompted the DPR, to begin to look for more transparent market ways of giving out the blocks. Thus, the open competitive bidding process was introduced in 2000.
"The process which was first adopted in 2000 paid off, as the country for the first time realised as much as $222 million from oil block sale. Also in 2005, when the process was again applied, about $1 billion was realised. And in 2006 and 2007, Nigeria realised $504 million and $502 million respectively.
"In the 2005 licensing round, some people had come to put frivolous bids and they could not pay. They thought that like in the old manner, they could still hold on to them, but when the government made up its mind that all those allocations would be withdrawn, it drew wrath from them. But not deterred by the criticisms from those who lost out, the DPR in 2006, took a step further and said, anybody who wanted to participate in the in the bidding in Nigeria would have to deposit 25 percent of the offer before being declared the winner. This again paid off as the country raked about $1billion from the exercise. And in 2006, about $504 was realised from the open bidding process," he said.
Continuing, he said in 2007 bid round, the DPR had adopted more stringent measures by demanding that participants must deposit 50 per cent of the signature bonus at the bidding conference.
He said the measure yielded result as more than $502 million was realised from the licensing round, despite wide criticisms from entities who had faulted the grant of RoFR on some oil blocks to some new entrants.
The controversies that trailed the award of some acreage licences in the 2006 bid round had led to the sack of Chukwueke by Obasanjo. He was however recalled after the president was said to have discovered that afterall, he acted on the advice of his superiors.
THISDAY learnt that companies that did not comply with the guidelines may end up losing their blocks in the latest probe.
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