CBN accused NNPC of transferring and sharing proceeds from oil blocks
The Nigerian National Petroleum Corporation, NNPC, on Thursday said it did not allocate to itself, nor take over or transfer the equity or operatorship of blocks by its upstream subsidiary, the Nigerian Petroleum Development Company, NPDC, to third parties.
The Central Bank of Nigeria, CBN, governor, Lamido Sanusi, had told the Senate Committee on Finance probing the NNPC that the national oil company had transferred its equity stake-holding in NPDC operated eight oil blocks to Atlantic Energy and Septa Energy Nigeria Limited, a subsidiary of UK-based Seven Energy to use in raising finance, to produce and sell oil. Mr. Sanusi alleged that the proceeds belonging to Nigeria from the arrangement was not paid to the federation account..
The oil blocks vacated by Shell Petroleum Development Company, SPDC, include oil mining leases, OMLs 4, 38 and 41 to Septa Energy; OML 26 to First Hydrocarbon Nigeria and Afren; OML 42 to Neconde and Kulcyzk Oil; OML 30 to Shoreline and Heritage Oil; OML40 to Elcrest and Band Oil and Gas, and OML 34 to ND Western and Petrolin.
Mr. Sanusi had accused Atlantic Energy and Septa Energy, which signed a number of strategic alliance agreements, SAAs, with the NPDC, of diverting a substantial amount of what constitutionally belonged to the federation without due process.
The CBN governor accused the NNPC of engaging the two companies as Special Purpose Vehicles, SPV, to operate the oil blocks as technical partners, despite their inexperience, and sharing among themselves the proceeds, which should have been paid into the Federation Account.
But, in its response, the NNPC denied taking over any oil block. It said the assignment of interests in oil blocks to the NPDC adhered strictly to statutory procedures.
“NNPC is not in a position to take away any oil block or allocate same to itself as it does not have such powers,” the Group Managing Director, NNPC, Andrew Yakubu said. “There is a statutory procedure for the assignment of interest in blocks which was adhered to in the case of NNPC’s assignment of interest to NPDC”
Mr. Yakubu also denied any action to transfer the operatorship or equity in the oil blocks to any third party, pointing out that there was no operation of the asset by the SAA counterparties, as NPDC is the operator of the blocks.
Identifying the growth and development of NPDC’s production capacity as a critical component of NNPC’s transformation agenda, Mr. Yakubu said the acquisition of interests in asset divested by some international oil companies was part of government’s strategic initiative to further strengthen the company into a medium size upstream company.
Established in 1988 and assigned few assets as part of Government’s aspiration to develop capacity in the upstream sector of the petroleum industry, Mr. Yakubu said though NPDC reserves base was about 350 million barrels as at 2010, mainly from the offshore OML 119 block, its production capacity was just about 50,000 barrels per day.
He said the opportunity to grow NPDC’s crude oil and condensate production capacity to 250,000 barrels of oil equivalent by year 2015 came with the divestment by IOC partners of some of their assets in the western Niger Delta arising from portfolio restructuring.
In compliance with the provisions of the Petroleum Act, which confers the powers to grant licenses or leases to explore, prospect, and produce petroleum on the Minister of Petroleum, the GMD said NNPC took advantage of the opportunity to seek and obtain the consent for the assignment of interest in the vacated asset to NPDC.
Apart from the growth of NPDC’s asset, he said the assignment of the assets was to also reduce the burden of cash call payment of the government, pointing out that in spite of the assignment, government was still entitled to royalties of about 20 per cent and Petroleum Profit Tax, PPT from and other previous acreages owned by NPDC.
On the SAA, the GMD said following the take-over of five of the eight oil mining leases hitherto operated by the SPDC, it became imperative for NPDC to evolve ways to meet the required funding through various capitalization Initiative and other funding arrangements.
The SAA, he said, was one of such third party funding arrangements that would enable the NPDC to obtain quick funds to bankroll work programmes to ramp-up production in its onshore/swamp assets to 250,000 barrels per day, BPD, and 670 million standard cubic feet of gas per day by 2015.
With the arrangement, he said the NPDC has been able to access financial resources that have enabled it grow its oil and gas production capacities from 60,000 BPD and no gas sales to 138,000 BPD and 450 million CFD of gas respectively.