SPECIAL REPORT: How corruption fuelled allocation of Nigeria’s oil blocks

NNPC Headquarters, Abuja
NNPC Headquarters, Abuja [Photo Credit: Thisday]

With barely a month to the 2003 presidential election in Nigeria, Funsho Kupolokun, the Special Assistant to then President Olusegun Obasanjo hurriedly put together a bid round for three oil blocks – OPLs 223, 251, and 257.

At the end of the bid round in which only Elf Petroleum (Nigeria) Ltd, ExxonMobil Ltd, Vintage Oil and Gas, and ECL International Ltd participated, ExxonMobil and Vintage Oil and Gas were jointly awarded OPL 257 while ECL International Ltd got OPL 251.

OPL 223 was not awarded to any company.

A House of Representatives committee which investigated those allocations five years later described the bid as “curious” because it was done three years after the introduction of the principle of open, competitive bidding. Also, none of the blocks was listed as being on offer in a report of the Committee on the Evaluation of Bids for the Year 2000 Licensing Rounds.

Part of the reasons for the flouting of due process in the allocation which led to the country losing billions was poor oversight of the process from the petroleum minister at the time – President Obasanjo.

After Mr. Kupolokun’s allocation in 2003, the Bid Evaluation Committee discovered that both Vintage Oil and Gas Ltd and ECL International Ltd not only had “doubtful experience, technical ability and track records;” they were also unknown to the Nigerian oil and gas industry.

In a 2008 report by a House of Representatives committee on Due Process of Allocation of Oil Blocks by the Department of Petroleum Resources (DPR) obtained by PREMIUM TIMES, the lawmakers found no evidence that the 2003 bid round got a ministerial approval from the petroleum minister, Mr. Obasanjo.

In addition, a series of sharp practices dogged the payment of signature bonuses on the oil blocks. For instance, Vintage Oil and Gas paid a mere $2.5 million in signature bonus while Elf Petroleum Nigeria Limited made a staggered payment of $15 million as against the assessed $20 million.

“The circumstances in which Elf Petroleum Limited that had not been awarded OPL 223 on March 12, 2003, came to be awarded the same block six weeks later on April 29, 2003, is suspicious,” the committee report stated.

Funsho Kupolokun

“It is all the more suspicious when this later award is juxtaposed against the fact that its partner on the block is NPDC, a subsidiary of NNPC (Nigerian National Petroleum Corporation).”

The committee recommended that since the award of OPL 223 could not be revoked due to the involvement of the NPDC, the balance of $5 million be immediately recovered from Elf Petroleum Nigeria Limited.

It also condemned the role played by Mr. Kupolokun and called for his reprimand for “arrogating to himself the discretionary powers of the minister.”

“Engineer Funsho Kupolokun’s role in the subterranean award of OPL 223 should be thoroughly investigated to establish if any malfeasance borne out of interest influenced the circumstances of this award and prosecuted if such malfeasance is established.”

In December 2003, Mr. Kupolokun, who became Special Assistant to the President in 1999, was appointed Group Managing Director of the NNPC.


To directly oversee the operations of the petroleum ministry, Mr. Obasanjo, a retired army general, appointed himself the petroleum minister, to be assisted by the late Rilwanu Lukman and Mr. Kupolokun as Presidential Adviser on Petroleum and Special Assistant to the President respectively.

Following Nigeria’s return to civilian government in 1999, the first licensing round was held one year later. Mr. Obasanjo opted to abandon the long-standing discretionary approach used by the military rulers – where oil blocks were given out to associates, friends and cronies without due process and at give-away prices – and replace it with a more transparent system.

In the past, beneficiaries of the blocks turn around and hawk them to international oil companies at huge profits.

There were 33 blocks on offer in the Year 2000 bid round: 22 offshore, half of them located in deep waters; seven in shallow waters; and four onshore.

The Bid Committee, ranking companies in accordance with the criteria contained in the guidelines for the allocation of the blocks (the best company ranked first and the least ranked last), submitted its Evaluation Report to the Mr. Lukman. Mr. Lukman was abroad, and so Mr. Kupolokun acted upon the evaluation.

In the end, only eight blocks were taken up.

The final result saw some of the companies ranked first in the bid committee’s evaluation report losing out in the allocations. For instance, Obekpa Petroleum Limited which was the preferred bidder for OPL 242 lost the block to Ocean Energy Limited and Nigerian Petroleum Development Company. Also, the concept of ‘forced marriages’ was introduced into the award process leading to companies being paired to co-own oil blocks. The Nigerian Agip Exploration and NPDC were awarded OPL 244 although Statoil Nigeria Limited emerged the preferred bidder. Another block, OPL 322 in which Shell Nigeria Exploration & Production Company emerged the preferred bidder was awarded to the company and Dajo Oil.

All the 10 recommended awardees by the Evaluation Committee for 10 oil blocks in the 2000 bid round were no longer in possession of the blocks by 2007.

Although Peter Achebe, then acting Director of DPR, and Mr. Kupolokun testified before the House committee that there were no complaints on the ‘forced marriages,’ Obekpa Petroleum Limited petitioned the committee over how it was edged out from OPL 242 by a consortium led by Ocean Energy Limited that did not participate in the 2000 bid round.

Igo Aguma, chairman of the House committee, said only $5 million, out of a possible $248 million, was remitted to the Nigerian government as signature bonus during the 2000 bid round.

The House committee noted that based on the preponderance of evidence before it, there was no way the bid committee could determine that every instruction received from both presidential aides – Messrs Lukman and Kupolokun – had ministerial approval.

“In effect, it was not clear if these two political office holders were acting by the authority of the minister as provided in the Petroleum Act or on their own.

“There was also no means of confirmation as access to the president who was also the Minister of Petroleum Resources was severely restricted.”


The wrongs of the 2000 bid round were taken into consideration at the next major licensing round in 2005 and led to the introduction of new elements. It was Nigeria’s first ever open auction as bids were projected simultaneously onto an electronic screen for everyone to view.

A total of 77 blocks were on offer, as against 61 blocks directed by the Presidential Adviser on Petroleum and Energy, Edmund Daukoru. Mr. Daukoru gave the directive dated March 5, 2005 in an internal memorandum sent to the DPR, the Permanent Secretary at the Petroleum Ministry, and NNPC.

Forty-four of the blocks were finally awarded.

But the principle of ‘forced marriages’ continued and operators were mandated to give up to 10 per cent equity in any block to an indigenous company, known as the Local Content Vehicle (LCV). This threw up a lot of shell or paper companies and caused serious difficulty with due diligence. Out of the more than 100 LCVs that pre-qualified, only 10 per cent had previous experience in oil exploration and development.

Furthermore, it was the first time Asian National Oil Companies participated in Nigeria’s bid rounds. Being new in the terrain, they were guided into their choice for LCVs, according to a 2008 report by Chatham House.

The round raised over $1 billion in signature bonuses, which was far less than had been anticipated, the report added.

Many of the LCVs of choice turned out to be cronies of politically exposed persons in the country.

For instance, NJ Exploration Services owned by Emmanuel Ojie, a close associate of Mr. Obasanjo was the approved LCV on one of the blocks awarded to the Koreans. Another of his company, Emo Oil, was the LCV approved for two blocks awarded to India.

Southland, belonging to Andy Uba, who was a special adviser to Mr. Obasanjo, was teamed up with Korean National Oil Company.

Shore Beach Exploration, jointly owned by Mr. Ojie and Emeka Offor, was the approved LCV for blocks awarded to China in 2006.

Also, the principle of the Right of First Refusal, RoFR, was introduced in the 2005 round, offering the Asian companies lucrative blocks in return for strategic investments in the country. As a result, the international oil companies pulled out of the bid.

Fourteen blocks were tied to strategic downstream investments and had the RoFR attached to them – OPLs 274, 275, 277, 278, 280, and 290 were tied to refineries; OPLs 281, 282, 287, 289, and 732 to independent power projects; and OPLs 276, 283, and 288 to Liquefied Natural Gas/Gas to Liquid. Any company with a RoFR over a block had the right to match a winning bid and pay within a specified time.

The House committee report noted that although the objective of the 2005 round to be transparent was commendable, several factors were responsible for its failure.

“First, the obvious manipulation of the bid process for various reasons to meet specific ends, and secondly, the room such manipulation created for abuse.

“The result is that due process and transparency which were touted as the hallmark of this bid were definitely blurred. The International Oil Companies kept away, and the Asian National Oil Companies did not participate in the manner envisaged. Those companies that participated ended up generating controversy.”

The committee found that there was confusion as to the number of approved blocks put on offer. While Mr. Daukoru’s internal memo stated 61, the Bid Report said 77. The same confusion re-occurred on the number of blocks won; where two figures – 36 and 44 – were reported to have been awarded.

A total of 38 companies whose names and application forms did not appear in the Bid Report won interests in 23 of the 36 oil blocks listed. The application forms of 11 companies who participated in the registration process and won blocks were also missing.

“What is established is that companies that did not register for the bid process were pre-qualified, and eventually awarded blocks in clear violation of both the Internal Memorandum and the Guidelines,” the House committee stated.

“Moreover, participation in a bid process is, depending facto, an application for an Oil Prospecting Licence (OPLs). The non-registration of these 38 companies and their consequent non-payment of the statutory application and processing fees of US$10,000 each totalling US$20,000 per application (are) therefore a clear violation of paragraph 59(a) and (b) of the Petroleum (Drilling and Production) Regulations.”


A major setback to the process of awarding the blocks, particularly the 2005 Bid Round, was the inability of the DPR to provide a comprehensive data on the blocks on offer.

The bigger obstacle during the round, however, remained the government’s use of RoFR – introduced one week before allocation round – which was not clearly defined in the guidelines and, as a result, led to the subversion of due process.

The government awarded OPLs 321 and 323, two deep offshore blocks, to KNOC on RoFR even though the blocks were not listed among those tied to strategic downstream projects.

In fact, there was no evidence that any strategic downstream project was attached to any deep offshore block in the 2005 Bid Round. Mr. Daukoru admitted that it was introduced late in the Bid Round and that a one week notice given to the bidders was sufficient.

The House committee said it found Mr. Daukoru’s explanation untenable in a system designed to be fair and transparent.

“Our finding is justified by the fact that it was apparent that the introduction of the principle was influenced by the various Memoranda of Understanding signed between Dr. Daukoru as HMSPR (Honourable Minister of State for Petroleum Resources) and various Asian National Oil Companies, KNOC and CNPC inclusive in the course of the Bid Round Process wherein commitments to award oil blocks to these companies were made.

“We therefore find that the introduction of strategic downstream project/RoFR late in the Bid Round with a patently insufficient one week notice and after MoUs had been signed with preferred bidders subverted the due process of the Bid Round.

“It is however clear that the HMSPR was not acting on his own volition in introducing this principle, but on the instructions of the substantive minister, President Obasanjo.”

Incidentally, the two deep offshore blocks, OPLs 321 and 323 were bided by the Indian oil company, ONGC Videsh Limited, at a signature bonus of $485 million. This was the highest signature bonus posted for the blocks, and based on the parameters for the commercial bid, the firm ought to have been declared winner of the block.

Curiously, Mr. Daukoru responded to the bid by announcing that KNOC had a RoFR over the block and invited KNOC to match the bid even though from the evidence obtained by the Committee, ONGC Videsh Limited was prepared to pay its signature bonus immediately and in accordance with the guidelines.

The ad-hoc committee found that the minister was prepared to subvert the due process because of the commitments contained in a MoU dated July 25, 2005 which he signed with KNOC. It noted that the minister knew as of the time he entered into the MoU that there were no strategic downstream projects attached to any deep offshore block. As a result, the only way KNOC could win any block was to post the highest signature bonus and make the corresponding payments in accordance with the bid guidelines.

But rather than KNOC matching the signature bonus posted by ONGC Videsh Limited, the company made misleading presentations to the ad-hoc committee claiming that it received a discount of $231 million on the payment of signature bonus. It did not present any evidence to support the assertion.

A. O. Chukwueke, the DPR director, in his internal memo dated January 4, 2006 and addressed to Mr. Daukoru admitted that KNOC was unable to meet their RoFR on blocks 323 and 321. This was long after the commercial bid had closed.

The total signature bonus paid on these two blocks was $255 million – KNOC paid $92.3 million and its partner, Equator Exploration Nigeria Limited paid $162.7 million. KNOC paid in June 2006 while Equator paid in March 2006.

However, none of the payments were made in accordance with the guidelines which required immediate payment of 50 per cent of the signature bonus at the time of the bid round or within 48 hours by a company with a RoFR.

“$231 million is still outstanding on these blocks which KNOC believes that it does not have to pay. Surprisingly, the DPR presentation on signature bonus payments falsely signifies that KNOC has paid the sum.”

Weeks of efforts to reach some of the actors in the 2000 and 2005 bid rounds were not successful.

Most of the companies who benefitted in the oil blocks’ allocations at the time are now virtually non-existent.

Messrs Kupolokun and Aguma could not be reached for comments.

Mr. Daukoru, who is now a traditional ruler in Nembe Kingdom in Bayelsa State, declined to speak on the allocations during his time.

“(Any claim against Mr. Daukoru) is absolutely nonsense and unacceptable, we cannot answer,” said Young-dede Howells, a Nembe Kingdom palace spokesperson.

“They should go to NNPC and find out, not to us. The onus of proof that so and so happened is within the petroleum ministry. Thank you very much.”


No fresh allocation of oil blocks have been made since President Muhammadu Buhari assumed office. His predecessor, Goodluck Jonathan, also made no fresh allocations. But fresh allocations may be made by the current administration with experts saying such is due. Like Mr. Obasanjo, Mr. Buhari, also a retired general, doubles as the petroleum minister.

Experts, however, warn that Nigeria must learn from the failures of the oil block allocations made by the Obasanjo administration.

Alex Neyin, a former Chevron staff, said oil block allocations in Nigeria are hardly transparent.

“The one they did for the marginal fields in 2002/2003 was the only one that we can refer to as near-transparent, all others have been on a man-know-man basis,” Mr. Neyin, a U.S.-trained Petroleum Engineer, told PREMIUM TIMES.

“Subsequent ones like the Agbami were discretionary, the then head of state just look at people, ‘this is a friend give this to him this is another friend give this to him.’

“Now, nobody should sit down and allow any nonsense like that happen because it is a common Nigerian property and nobody, call yourself president or whatever, should have the discretionary right to give those leases out without doing it honestly and transparently. If anybody does anything differently, it will amount to corruption and nobody wants that.”

Mr. Neyin said several individuals who had been awarded oil blocks lacked the capability to operate them.

“If you ask me, this is the time for retribution,” said Mr. Neyin, who had supervised the allocation of marginal fields by Chevron in the past.

“All the people you hear their names with oil blocks making millions, they don’t know anything about the industry and have no business owning the blocks it was just the president saying ‘you are my friend, take.’

“If you ask me, this is the time for retribution. They can call them – the people harvesting a national thing for personal gains and flaunting it over the faces of poor people – they should be able to sit back and say we want to review all these things. It’s a hard thing to do but it’s doable.

“Because what is causing the problem in the country now is inequity, you see people who are flaunting money, you can’t see what they are doing but it’s just positional play and the down-trodden people are all there in their numbers hanging with nothing.”

Saka Matenilola, ex-president of the Society for Petroleum Engineers, called for a review of the allocation process such that only those with the technical as well as financial competence would be beneficiaries.

“This is our national heritage and something that if we get wrong, we will collectively suffer the consequence and one of the things that we are suffering from now. Imagine if those oil blocks were given to people who were capable and can attract the financial resources to develop them, it will create more jobs as well as capacity and competence of Nigerians.”

(This report had support from the Natural Resource Governance Institute as part of the Media for Oil Reform Fellowship Programme).


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  • thusspokez

    Part of the reasons for the flouting of due process in the allocation which led to the country losing billions was poor oversight of the process from the petroleum minister at the time – President Obasanjo.

    It wasn’t a poor oversight but method by which he, Obasanjo became an overnight billionaire – Chicken farmer my behind!

    It was hilarious when a BBC interviewer called Obasanjo – to his face – the “father of corruption”. He is indeed one of the pioneers of corruption in Nigeria – and imagine — who is now calling other people, corrupt. Talking about the pot calling the kettle black. Only the so-called ‘Congress of Yoruba sons and daughters’ believes that Obasanjo is not corrupt, but a saint.

    • Ekoile

      You were making sense ’till your last sentence with your tribalism. News flash, an average Yoruba man detest corruption, also hates Obasanjo politics, Yoruba people don’t defend plunderers we out thieves.
      A good name is more precious than oyel (black gold) and silver.

      • thusspokez

        an average Yoruba man detest corruption

        Every Nigerian hates corruption until it involves their tribesperson, at which point they change their tones to defend the tribesperson and raise all sorts of “whatabout” questions.

        • share Idea

          And this your assertion has been my greatest problem with people that single out GEJ for vilification instead of collectively naming all the leaders aptly what they are (opportunied criminals in government)

          • thusspokez

            Particularly, the Yorubas on PunchNg and SaharaReporters who will attack anyone who dares to call the likes of Obasanjo and Tinubu corrupt.

            As far as some Yorubas are concern, it was GEJ who invented corruption in Nigeria despite the Yorubas being disproportionally corrupt compared to other ethnic groups, and making up a large number of people investigated by the EFCC for corruption.

            Although I detest GEJ, I often find the hypocrisy of the Yoruba posters on the aforementioned websites too much to take and remind them of the long list of Yoruba looters and crooks.

    • Pawa2

      You talk absolute rubbish. If any ethnic group in Nigeria has shown its hatred for corruption and stealing, it is the Yorubas. Unlike some other ethnic groups, Yorubas do not offer blind support to their kinsmen if they are accused of corruption. Indeed, the editor of this newspaper (premium Times) is a Yoruba man, so if he intends to reflect Obasanjo as a saint he would not have published thus article. Whether the points raised in the article are true or false, it is difficult to be sure until one hears the other side of the story. However, it is indisputable that the greatest critic of Obasanjo when he was President were Yoruba journalists and public.

      • thusspokez

        Yorubas do not offer blind support to their kinsmen if they are accused of corruption

        They do! They might have stopped the tribal facial marks practice, but believe me, they are the most tribal in Nigeria.

        the editor of this newspaper (premium Times) is a Yoruba man

        You have just proven my point of how tribalist Yorubas can be. I have been visiting this website for over a year, but have no idea what tribe, any of the employees of this website belong. It must be very important for you to fight out which ones are Yorubas.

        … so if he intends to reflect Obasanjo as a saint he would not have published thus article.

        The editor is running a business in a very competitive market; and this report is the result of an investigative journalism. PT cannot risk its readership losing confidence in its reports by being blatantly tribalistic.

        • Pawa2

          Your statements lack logic and wisdom and are not backed by truth and facts.
          1. Your statement on facial marks is an indication of your hatred of Yorubas (not that it had been hidden in your previous comments, but it should now leave no one in no doubt of your inclination). Having said that, I do not think any Yoruba person is affected by, or gives a damn about, your overt hatred towards them.
          2. Discerning and intelligent people like me don’t have to go about looking for information with an ulterior motive. If you have been visiting this site for year and have not come across articles that mention who the editor is (when such articles have existed) them you have to blame your lack of intelligence.
          3. When it comes to investigative journalism, I believe PT have the lead in Nigeria. There are many areas in Nigeria that lend themselves to investigative journalism and this newspaper can decide to focus on those that do not affect Yorubas adversely. You are so obsessed with reflecting Yorubas as being ethnically biased that you have even labelled the editor of PT as a ‘tribalist’. That is the rot you have got your brain into.
          Your problem is that you are a petty small minded tribalist with a deep hatred for Yorubas. You will go to any length to reflect them negatively. Your problem is that whilst you are blaming the wrong people, your live is disintegrating behind you.

          • thusspokez

            Your statement on facial marks is an indication of your hatred of Yorubas

            You can call it hate as many times as you wish, it will not deter me from repeating that Yorubas are a very tribalistic lot. The “facial marks” remark is not intended to be taken literally but figuratively to show how deep seated Yoruba tribalism can be.

            Yorubas as being ethnically biased that you have even labelled the editor of PT as a ‘tribalist’.

            Where had I said this? Or maybe you comprehension skill leaves much to be desired. I read and the comment on an article if I have something worth saying. I don’t give a damn who reported or wrote it. Why would a reader want to know the ethnicity of a journalist unless the reader was tribalistic?

            Your problem is that you are a petty small minded tribalist with a deep hatred for Yorubas

            This will come as shock to my regular Igbo critics on this websites and many other Nigerian websites who often call me a Yoruba as an insult whenever I write something that they disagree with.

            Further, I am a bit surprised that in typical Nigerian response, you have not called me (say) an Igbo or Hausa or even Fulani, as a way of insult. Frankly, I don’t give a damn! If you don’t enjoy my objectivity, tough! You will overdose on it if you continue to read my comment.

  • Okakuoofbenin

    So much for our moral apostle. Engr. Dr. Chief, General, Commander, Pastor Olusegun Okikiola Aremu Obasanjo the biggest hypocrite on planet earth. Anything that has to do with this man is fraudulent. Remember the story about the son paying 700,000 Dollars cash for a house in NY? His domestic assistant illegally transporting 100, 000 Dollars in a diplomatic bag? It is goes on and on in a tragic narrative that has plagued us as a country. But wait a minute, you will see his dumb witted supporters jump on the thread to defend and justify the crook.

  • share Idea

    Another diversionary tactics by one of the media houses of this administration. GEJ’s corruption story is no longer doing the tricks, it now OBJ. Nigeria we hail thee

  • Gary

    Thanks PT for this retrospective report on the petroleum sector ten years after the fact.
    Okay, has anything changed now under Buhari or we’ll have to wait ten years after he leaves to read your report about his own tenure as Oil Minister? Una dey fear abi with 2019 elections on the horizon, we are going back to the APC playbook of using the Nigerian media to misdirect public opinion that Buhari is fighting corruption. When all he’s done is simply playing the same games with his own team at NNPC.

    Folks, here’s a helpful hint: if any President makes himself Petroleum Minister and/or picks his kinsman as GMD of NNPC, you can take it to the bank (pun intended) that he plans to loot oil money. The pattern is clear – from OBJ to GEJ and now Buhari.

    The more things change, the more they stay the same, especially in Nigeria. Na turn-by-turn looting.

  • thusspokez

    “The circumstances in which Elf Petroleum Limited that had not been awarded OPL 223 on March 12, 2003, came to be awarded the same block six weeks later on April 29, 2003, is suspicious,” the committee report stated.

    Allowing Elf to operate in Nigeria just goes to demonstrate how stúpid the Obasanjo government was.

    The only reason the French government supported biafra during the civil war was so that Elf would get the monopoly to prospect for oil in the now South-South region. For this, Elf through the French government egg on the biafrans to continue fighting even when there was no more hope. Many more Igbos died as a result.

    The Igbos lost the war and people and properties whereas ELF got the oil blocks that it had always wanted, and for which it had deceived many Igbos to lose their lives unnecessarily.

    • Wale

      The people that listened to the shady French government and continued to fight despite being at the losing end demonstrated how unwise they were; not the rogues in Nigeria’s government that just wants to line their filthy pockets without giving a “sheet” where it comes from.

  • Yusuf Mungu

    ‘Na turn by turn looting’! has anything changed?

  • Dr Pat Kolawole Awosan

    President Muhammadu Buhari, is the substantive minister of petroelum resources and by now supposed to have implemented a full restructuring and reforms in the NNPC and Nigeria petroleum resources sector to straighten out all these annormalies in that oil sector.