LOOTING ON AN OBSCENE SCALE : Petroleum Minister, Allison-Madueke Defends Awarding NNPC’s Oil Blocs Worth USD15.72Trillion to Her Company .... READ FULL GORY DETAILS HERE

Defiant Nigerian Petroleum Minister, Diezani Allison-Madueke has defended her decision to transfer the ownership of four oil blocs owned by the federal government through the Nigerian Petroleum Development Company Limited to a company owned by her and run by Mr. Jide Omokore,  Atlantic Energy Drilling Concept. The oil blocs are valued at over USD$15.72 trillion.
The minister’s defence of the flagrant looting of the nation’s commonwealth is coming barely 24 hours after a group of anti-corruption civil society groups petitioned the country’s now crippled anti-graft police, the EFCC to probe allegations bordering on the dubious secret transfer of the oil blocs. The NGOs petition was based on the action of a group of Delta state indigenes under the aegis of Restoration Niger Delta which had in a petition to the National Assembly accused the oil minister of secretly ceding the oil blocs to her company managed by Omokore.
Sensing that the issues will not be buried easily like her previous deals, iReports-ng.com gathered that the oil minister ordered her errand boy, who is the Group Managing Director GMD of NNPC, Engr. Andrew Yakubu to defend the deal. As a result, the GMD in a letter written and dated 30th April, 2013 to Senate Committees on Upstream and Downstream flayed the groups for raising allegations of impropriety against the Almighty Minister.
Inside sources in NNPC who are angry with what the minister has turned the organisation to told iReports-ng.com that already a whooping N5o million has been dished out to about five national newspapers in Nigeria to give the minister’s defence of the deal prominence in their papers tomorrow, Thursday May 2. ” I can tell you that the letter which is yet to get to the two Senate Committees we addressed it to has been leaked to some five newspaper editors in Abuja today so that they can help us put the story on the front pages of their newspapers tomorrow”, one of our reliable sources in NNPC disclosed.
iReports-ng.com gathered that a number of newspaper editors and publishers have been highly compromised by the oil minister and as a result, any negative report against the minister, her ministry or agencies under her is forbidden in their newspapers. Some recalcitrant reporters and editors were said to have either lost their jobs or gotten queries on account of this standing order.
In her letter of defence to the Senate Committees obtained by iReports-ng.com from a top official in NNPC, the minister said “We are very mindful of the objectives of the Bureau for Public Procurement and the scope of application of the Public Procurement Act and we wish to state that the Strategic Alliance Agreement entered into with the Atlantic Energy Drilling Concept Limited does not fall within the purview of the Public Procurement Act.”
Still defending the multi-trillion dollars oil deal, Allison-Madueke said “On the Petitioners allegation that the Strategic Alliance Agreement violates the Oil Industry guidelines, obfuscated as the allegation is, it is instructive to note that this transaction was not a bid process for the allocation of oil blocks. Therefore, the oil industry guidelines were not violated. In fact, the Agreement is in furtherance of the Federal Government’s objective of funding cash call obligations from alternative sources such as service contracts, Production Sharing Contracts and Alternative Funding arrangements as currently being practiced in the traditional Joint Venture operations.”
Our source further disclosed that the heavily paid for reports “will most likely dominate some of our national newspapers tomorrow and as we speak i can even tell you that we have some of the headlines some of the papers will use tomorrow in their papers, it’s that bad.” The letter signed by Andrew Yakubu with the title “RE: THE UNSPEAKBLY FRAUDULENT ALLOCATION OF NATIONAL PETROLEUM ASSETS TO MR JIDE OMOKORE AND MR KOLAWOLE ALUKO BY THE INCUMBENT HONOURABLE MINISTER OF PETROLEUM”,
is reproduced below:

“We refer to the petition written by Restoration Niger Delta dated 4^th March 2013 in which the petitioners made the following spurious and unfounded allegations against the management of the Nigerian  Petroleum Development Company Limited.

1. That the officials of the Nigerian Petroleum Development  Company Limited, without tendering or bidding process, transferred production rights in OMLs 30, 34,26 and 42 to Mr. Jide Omokore’s Atlantic Energy Drilling Concept and by such transfer, 60% ownership of Nigerian Petroleum Development Company’s 55% equity interest in the affected OMLs are transferred to Atlantic Energy Drilling Concept.
2. That the proven oil reserves of the blocks is five billion barrels valued at USD 380billion or N58.9trillion using the 2013 oil benchmark price plus 4TSCF of Gas valued at USD15.72trillion
3. That OML 30 fetched the Federation Account USD50million as initial entrance fee as against USD1.3billion received by SPDC for its 45% equity interest in the same block.
4. That the true market value of OML 30 divested to Atlantic Energy Drilling Concept would have been USD 800million if the Nigerian Petroleum Development Company Limited had carried out open and competitive bidding process as required under the Public Procurement Act.
5. That Atlantic Energy Drilling Concept has no functioning office or staff and has never executed a single oil-related contract and taken any project or produced any barrel of crude.
6. That the execution of the Strategic Alliance Agreement violated the Public Procurement Act and the Oil Industry guidelines which demand that allocation of oil blocks and the award of service contracts shall be based on an open competitive bidding process.
7. That a similar Strategic Alliance Agreement for OML 34 was finalized with Atlantic Energy Drilling Concept on May 25, 2011 for another USD500million for 60% equity of Nigerian Petroleum Development Company’s 55% interest while SPDC’s 45% interest in the same OML divested to Niger Delta Energy and Petroleum Company was sold at USD600million.
8. That in September 2010, the Honourable Minister entered into a service contract with Seplat Energy International Limited through its Nigerian subsidiary, Mr. Kolawole’s Septa Energy Nigeria Limited for USD 54million as entrance fee. That the company will also recover its cost before sharing profit and can lift crude and keep the entire proceeds of sale abroad.
9. That the Minister’s action amounts to a tactical reintroduction of the single source procurement practice abolished in the industry in 2004.

We have formulated six (6) issues to address the allegations made by the petitioner. They are:
1)      Whether the Nigerian Petroleum Development Company Limited, through the Strategic Alliance Agreement, divested 60% of its 55% equity interest in OMLs 26, 30, 34 and 42 to Atlantic Drilling Concept Limited
2)      Whether the execution of the Strategic Alliance Agreement violates the Public Procurement Act
3)      Whether the execution of the Strategic Alliance Agreement violates the Oil Industry guidelines
4)      Whether the execution of the Strategic Alliance Agreement amounts to discretionary award of equity interest in OMLs 26, 30, 34 and 42 as alleged by the Petitioners
5)      The veracity of alleged proven reserves of crude oil and natural gas in the said OMLs and the quoted market value
6)      Whether the entrance fee paid by Atlantic Energy Drilling Concept can be considered as a payment for the acquisition of participating interest in the leases
Having formulated the above issues, we now proceed to address same thus:

1. Whether the Nigerian Petroleum Development Company Limited, through the Strategic Alliance Agreement, divested 60% of its 55% equity interest in OMLs 26, 30, 34 and 42 to Atlantic Energy Drilling Concept Limited.

The Strategic Alliance Agreement entered into between Nigerian Petroleum Development Company Limited and Atlantic Energy Drilling Concept Limited was not a divestment of Assets nor transfer of Operatorship but simply an alternative funding agreement in order to meet the Nigerian Petroleum Development Company Limited’s cash call obligations in the affected OMLs
Unlike the divestment of the private equity owners’ (The Shell Petroleum Development Company Limited, Total E&P Nigeria Limited and Nigerian Agip Oil Company Limited equity interest to ND Western Nigeria Limited and Shoreline Nigeria Limited) in which the entire 45% equity interest in the affected OMLs were divested, the Strategic Alliance Agreement simply creates an obligation for Atlantic Energy Drilling Concept Limited to provide funding for the development of these assets as opposed to acquisition of equity interest in the block.
It is instructive to note that the Nigerian Petroleum Development Company Limited is the Operator and still owns its 55% interest in OMLs. The Company has not divested any of its interest in the OMLs as erroneously alleged by the Petitioners. This can be easily discerned from the Strategic Alliance Agreement attached to the petition.

2. Whether the execution of the Strategic Alliance Agreement violates the Public Procurement Act

We are very mindful of the objectives of the Bureau for Public Procurement and the scope of application of the Public Procurement Act and we wish to state that the Strategic Alliance Agreement entered into with the Atlantic Energy Drilling Concept Limited does not fall within the purview of the Public Procurement Act.
The Nigerian Petroleum Development Company Limited is by the Strategic Alliance Agreement receiving funds from Atlantic Energy Drilling Concept Limited to finance its 55% equity interest in the affected OMLs and not the procurement of goods, works or services as contemplated under the Public Procurement Act.
Therefore, it is absurd to suggest that the Strategic Alliance Agreement is in contravention of the Procurement Act.

3. Whether the execution of the Strategic Alliance Agreement violates the Oil Industry guidelines

On the Petitioners allegation that the Strategic Alliance Agreement violates the Oil Industry guidelines, obfuscated as the allegation is, it is instructive to note that this transaction was not a bid process for the allocation of oil blocks. Therefore, the oil industry guidelines were not violated. In fact, the Agreement is in furtherance of the Federal Government’s objective of funding cash call obligations from alternative sources such as service contracts, Production Sharing Contracts and Alternative Funding arrangements as currently being practiced in the traditional Joint Venture operations.

4. Whether the execution of the Strategic Alliance Agreement amounts to discretionary award of equity interest in OMLs 26, 30, 32 and 42 as alleged by the Petitioners.

As earlier stated, the Strategic Alliance Agreement is not an acreage award nor a divestment as ownership of blocks still remains with the Nigerian Petroleum Company, NPDC. It is only a financial arrangement between NPDC an Atlantic Energy Drilling Concept Limited to provide funds for the operations of these blocks. There has been no award of a block during the entire exercise not to talk about a discretionary award

5. The veracity of alleged proven reserves of crude oil and natural gas in the said OMLs and the quoted market

There is indeed proven reserves of crude oil and natural gas associated with the SPDC/NAOC/Total divestment of 45% equity in the blocks. However, the quoted reserves of 5billion barrels corresponding to 60% of NPDC 55% equity is a calculated attempt to mislead the National Assembly and indeed the people of Nigeria as the entire 100% equity of the 4 blocks is not up to 5 billion barrels.
The actual revenue which is about 75% of the total reserves that is due to the Federal Government remains unchanged and has not been eroded as royalty and tax accruable to the federation account will be paid based on production. The market value as per the petitioner is only applicable if there is sale of assets, which is not the case. It is pertinent to state that the value of accruable to the Federal Government will always remain intact; as the Strategic Alliance Agreement will not impact the Federal Government earnings.

6. Whether the entrance fee paid by Atlantic Energy Drilling Concept can be considered as a payment for the acquisition of participating interest in the leases

The entrance fee paid by Atlantic Energy Drilling Concept was to acquire the right to fund and not payment for the acquisition of participating interest in the leases. This is common practice in the industry and best international practice.
The entire petition is based on the assumption that 60% ownership of NPDC’s 55% equity interest OML has been assigned to AEDC. This is a gross misunderstanding or at the very least a deliberate distortion of the working of the Petroleum Ministry.
“Mischievous and vexatious as the petition may appear, we have taken the pains to bring the issues to the fore to enable an understanding of the essence if the Strategic Alliance Agreement. In the absence of the innuendo created by the petition, the Strategic Alliance Agreement is in fact beneficial to Government and in tandem with Government’s objective of seeking alternative sources of funding and has not contravened extant laws.”