Hector Igbikiowubo
25 November 2008
The House of Representative Committee which investigated the oil bloc awards between 1999 and 2007 has cleared the Department of Petroleum Resources (DPR) of unilateral allocation of oil blocs during the period under review.
The Committee which was set up in April but commenced its work in June also indicted former President Olusegun Obasanjo and former Presidential Assistant on Petroleum matters Mr. Funsho Kupolokun between 1999 and 2003 among others, for the crisis that characterised the various bid rounds carried out between 1999 and 2007. Vanguard gathered that the Committee recommendations would be tabled before the general house for consideration before the end of this month.
According to the recommendations some multi-national oil companies are to refund signature bonuses running into billions of dollars.
It was gathered that the submission by Dr. Edmund Daukoru, the Former Minister of Energy, whom although was never invited by the committee, submitted a memoranda providing insight into most issues he perceived were misrepresented to the public during the exercise. In his submission, Dr. Daukoru reiterated that the former President occupied the position of the Minister of petroleum up to December 2006 and as such all issues and approval for execution emanated from him.
The submission by Dr. Daukoru clearly stated that DPR was under the supervision of the Ministry and reported technical and professional issues to the Minister and administrative matters to the Permanent Secretary of the Ministry. "Director of DPR reports to the Minister on technical/professional matters and to the permanent secretary on administrative matters."
The Minister told the Committee that all that happened during his tenure as either Special Adviser on Petroleum Matters, Minister of State for Petroleum were responsibilities delegated to him by Mr. President by virtue of section 12(1) of the Petroleum Act, Cap 2004.
He disclosed that prior approval for all process leading to any agreement was equally obtained from President Obasanjo. Daukoru submitted that there was no winner who did not pay prescribed fees and the bided signature bonus in full as stipulated, adding that the winner would not sign a Production Sharing Contract (PSC) with Nigerian National Petroleum Corporation (NNPC) without having scaled payment hurdles.
The former Minister said payment into the Petroleum Technology Development Fund (PTDF) account was in line with the directive by the Accountant General of the Federation.
"The allocation of oil blocks was a process which was subject to termination at anytime by the government if bidders defaulted. There were no exposures on the part of government and thus no necessity for DPR to investigate/verify standing of companies across the globe," the former minister explained.
Other recommendations of the Committee also queried, 'the practice of forced mergers of companies on the bid floor should cases necessitating this arise, particularly in the 2000 bid round. The practice violated paragraphs 14-16 of the First schedule of the Petroleum Act particularly in the circumstance where the merger is created for the purposes of bringing companies into a block won by a third party'.
The Committee report also queried 'the introduction of the Right of First Refusal (ROFR) in the 2005, 2006 and 2007 bid rounds, noting that it distorted the due process and transparency of these bid rounds.' In his submission, the former Minister said that the introduction of ROFR was designed to address the infrastructure development in the downstream sector as well as transport and power among others.
The recommendations however frowned at the handling of signature bonuses by Department of Petroleum Resources, noting that 'as a deterrent, all future signature bonuses that are refunded be refunded with interests calculated at existing bank rates for the period of retention and the officers responsible for the retention should be punished.'
The committee noted that some indigenous oil companies including Obekpa Petroleum were short changed and their interest should be reinstated.
The Committee recommended that: " Kupolokun should be reprimanded for arrogating to himself the discretionary powers of the minister', adding that 'Kupolokun's role in the subterranean award of OPL 233 should be thoroughly investigated."
The committee further said that there was confusion as to the number of approved blocks put on offer in the bid rounds. The committee also queried the introduction of downstream projects, noting that it was used to appease friends.
The committee also said that awards of OPL 321 and 323 to KNOC violated the principle of transparency in the extractive industry, stressing that 'the misleading information on the payment of US$231m signature bonus by KNOC is deplorable.'
Other recommendations among others include:
*The office of the Honourable Minister of Petroleum Resources effectively held by the President from assumption of office in 1999 until January 2007 is ultra vires the express provisions of sections 138 and 147 (2) of the Constitution of the Federal Republic of Nigeria 1999.
* This constitutional anomaly potentially undermines the legal due process of the Bid Rounds as it can be contended there was no Minister constitutionally recognized that oversaw the Bid Rounds in accordance with section 2 of the Petroleum Act.
* The practice of the President holding the office of the Minister of Petroleum should end. It is unconstitutional.
* The legal and commercial implications of such a conclusion are obvious, dangerous and potentially destabilizing for the oil and gas industry in Nigeria and could hamper the flow of much needed international financial capital / investments into the sector.
*It is therefore recommended that the provisions of sections 138 and 147(2) of the Constitution of the Federal Republic of Nigeria 1999 and section 2 of the Petroleum Act be strictly compiled with in the award f oil blocks. Specifically, the office of Minister of Petroleum Resources by whatever name called should be separate and distinct from the office of the President and Commander in Chief of the Federal Republic of Nigeria.
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