How poor disclosure, delayed passage of PIB mar Nigeria’s oil licencing exercise

Oil rig used to illustrate the story.
Oil rig used to illustrate the story.

Amidst repeated calls for transparency in the governance of Nigeria’s opaque oil industry and delayed passage of Nigeria’s Petroleum Industry Bill, the Nigerian government’s recent renewal of oil licences may have been marred by accountability and transparency challenges.

The integrity of the exercise, from which the government said it generated over $1 billion, continues to generate ripples among stakeholders.

The renewal was done under an accelerated lease renewal programme initiated by the Department of Petroleum Resources (DPR) to raise money for the government and incentivise operations in the country’s upstream oil and gas sector.

Despite assurance by the Federal Government that there were no irregularities in the renewal of the over 42 oil licences, PREMIUM TIMES’ analysis of the exercise raises transparency concerns.

Licences; production status

There are 42 licences due for renewal in 2019. The licences comprise of 35 Oil Mining Leases (OML) and seven Oil Prospecting Licenses (OPL).

The licenses are about 17 OMLs operated by Shell Petroleum Development Company; OMLs 4, 38, and 41 operated by Seplat Petroleum Development Company Plc; OMLs 40, 42, 26, 34 64, 65, and 66 operated by NPDC, as well as OMLs 116 and 117, operated by Agip Energy and Natural Resources and Amni International Petroleum Limited.

Others are OML 114, which is operated by Moni Pulo Limited; OML 115, by Oriental Energy Resources Limited; and OML 29, operated by Aiteo Eastern E&P Company Limited.

The rest are: OMLs 24, 18 and 30, operated by Newcross E&P Limited, Eroton E&P Company Limited, and the Nigerian Petroleum Development Company/Shoreline Natural Resource Limited, respectively.

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One of the measures with which industry experts access licences is to appraise the production status of the fields. PREMIUM TIMES did an independent check of the available status of some of the fields in 2018.

For OML 114, operated by Moni Pulo, the production status was put at 0.693172 million barrels for 2018. For OML 116 by Eni, the production figure was given as 1.134632 Mmbbl for the same year.

For OML 024, operated by NewCross, the production figure was 0.0803664 Mmbbl while that of OML 079 by NNPC was put at 5.778482 Mmbbl.

According to the Petroleum Act of 1969, the Minister of Petroleum Resources is authorised to renew oil licenses once statutory payments in terms of applicable royalty, concession rentals and fees are paid.

This position is also strengthened by the Petroleum (Drilling & Production) Regulation of 1969 (as amended in 2001).

But the opacity in the management of Nigeria’s oil industry, coupled with the delayed passage of the Petroleum Industry Bill (PIB), remains a major setback for the country.

Background

Last August, President Muhammadu Buhari withheld assent to the harmonised Petroleum Industry Governance Bill (PIGB) for constitutional and legal reasons.

Speaking through his special adviser on National Assembly matters, Ita Enang, the president said the provision of the Bill permitting the Petroleum Regulatory Commission to retain as much as 10 per cent of the revenue generated unduly increases the funds accruing to the Commission to the detriment of the revenue available to the Federal, States, and Local governments as well as the Federal Capital Territory.

Besides, Mr Buhari said he felt that expanding the scope of Petroleum Equalisation Fund made some provisions of the draft law to be in divergence from his administration’s policy and indeed conflicted with provisions on the Fund.

Stakeholders said that the failure of the government to pass the bill before the renewal exercise also raises accountability concerns. The bill proposes areas of increased transparency in the management of the nation’s oil wealth.

But speaking earlier in the year, Nigeria’s minister of state for petroleum, Ibe Kachikwu, noted that although most of the licences were due for renewal between 2019 and 2020, the ministry decided to start early for some policy reasons.

The minister noted that the law allows that licences can be renewed six months before expiration, adding that the move was part of President Muhammadu Buhari’s administration efforts to generate revenue in the oil sector.

“We decided to start the process early to generate some revenue for the government,” he said. “We also look at the terms under which they are renewed; that is all what we are doing.”

The minister argued further that early renewal was necessary for many companies to have opportunity to access fund for investment. He said companies that had less than six months for their licences to expire would never have access to fund in financial institutions.

Concerned lawmakers

Amidst the opacity surrounding the exercise, the Nigerian House of Representatives mandated the Committee on Petroleum Resources (Upstream) to investigate alleged infraction in the renewal of the oil licences by the Nigerian government through the DPR.

The decision came against the backdrop of a motion by Chika Adamu, a member of the House from Niger State. He alleged that the Federal Ministry of Petroleum Resources and the DPR were renewing leases of companies that had failed to pay royalties to the government for oil and gas lifted.

The lawmaker, who represented Shiroro/Rafi/Munya Federal Constituency in the eighth National Assembly, said this was in contravention of extant laws of the nation. The motion was put on a voice vote by Yakubu Dogara, former speaker of the House, and the lawmakers unanimously supported it.

Although the speaker thereafter mandated the Committee on Petroleum Resources (Upstream) to investigate the matter and report back to the House within four weeks for further legislative action; very little has been heard of the case ever since.

Reacting to the lawmakers’ claims, Mr Kachikwu disclosed that the ministry of petroleum resources and the DPR followed due process which culminated in the final approval granted by Mr Buhari.

In a statement, the ministry said it would “affirm most definitely that there are no irregularities associated with any lease renewal undertaken by the Ministry of Petroleum Resources” and the DPR.

“It will be of essence to note that the early lease renewal programme is a process ingeniously developed to expand and speed up earning potential from the renewal programme for the Federal Government and to also create security of title to leaseholders so as to allow them to continue the massive investments needed to improve production from their fields,” it added.

“The process would start with an application from a lease holder, an evaluation from Department of Petroleum Resources, followed by a review by the Honourable Minister of State, Petroleum Resources and culminating in a recommendation to the President for final approval.”

Opaque exercise; curious timing?

Despite the huge revenue involved, PREMIUM TIMES’ independent checks revealed that none of the company had its name published by the DPR as beneficiary of the renewal exercise.

Adeoye Adefulu, an oil and gas lawyer, told PREMIUM TIMES that according to the requirement of the law as presently constituted, the DPR has no obligation to publish the details.

He said: “When you asked the question in relation to transparency and accountability, there is no requirement, to be honest, under the current legislation for DPR to publish.

“You met all your obligations? Under the existing contract, you are not owing money, you are not owing tax, you are not owing royalties, you are not owing rentals, you are eligible for renewal… that’s the position of the law.”

He added, however, that in the light of the call for increased transparency in the oil industry, requests could be made for these details to be made more open and accessible to stakeholders. This transparency requests, he said, are captured in the PIGB and the PIB.

Again, PREMIUM TIMES observes that the timing of the exercise and the lack of transparency have equally raised suspicions among industry insiders.

An industry expert, who does not want his name in print, told PREMIUM TIMES that the absence of transparency could signal a breach of due process and extant laws.

That the opaque exercise was conducted ahead of a major election in February 2019 raised more concerns, the expert, who sought anonymity, added.

“Political elite seek access to cash from oil deals, including with international companies,” the expert said of th3 electioneering and timing of renewal exercise.

PREMIUM TIMES recalls that in 2011, just ahead of the general elections of that year, Shell and Eni paid the $1.3 billion to the government for the rights to the massive OPL 245.

Around $1.1 billion of this amount quickly left government accounts, in what has become perhaps Nigeria’s most controversial oil deal thus far, known as the Malabu scandal.

According to Global Witness, the former owner of the block got to keep around $280 million of this amount.

Around $520 million went to several companies controlled by Abubakar Aliyu, an alleged associate of former President Goodluck Jonathan. The Italian prosecutor’s report indicates that Aliyu then transferred the funds into cash, which was “intended to be paid to President Jonathan, members of the government and other Nigerian officials.”

Although Mr Jonathan denied any involvement, leaked emails from Shell executives suggest top officials may have known some of the funds would go towards pre-election payoffs.

Several efforts by this newspaper to get the DPR’s position was rendered futile.

For several weeks, calls and text messages sent to Paul Osu, head of DPR’s public affairs, were not acknowledged. He did not return calls placed to his known telephone numbers either.

Mr Adefulu noted that the industry requires transparency and accountability, one that allows stakeholders to track when licenses are due and up for renewal.

He added that the regulator should be encouraged to publish details of the basis upon which it made the renewal.

With that, the need for an oil sector that imbibes competitive due process and transparency would have been met, he added.

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