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Oil Block Scandal: Why DPR Autonomy is Imperative By When the Junior Minister or rather Minister of State for Petroleum Resources Dr Edmund Dakouru recently at an oil and gas conference in Abuja said “I believe that the Nigerian oil industry will be healthier with a government regulatory unit, Department of Petroleum Resources(DPR) and an operational unit the NNPC, that are technically strong, innovative and abreast of new developments worldwide”, he was merely re-echoing the blurred view of the Presidency on the independence and inspectorate status of the DPR.
As was originally conceived, the DPR (formerly Petroleum Inspectorate Commission) was supposed to be a world class regulatory agency with the capability of performing efficient monitoring functions in the nation’s oil and gas sector both upstream and downstream as well as managing new challenges in the sector.
It was supposed to be an autonomous watchdog of the nation’s oil industry with the capacity and right orientation to effectively monitor the sector and capture the appropriate revenues for the federation without undue interference from government.
However, the current status of the DPR vis-ŕ-vis the publicly known money-spinning NNPC could best be described as blurred and at worst obscured. The agency has been deeply or rather criminally buried into the bureaucratic day-to day life of Presidency, a situation that has given rise to the plethora of fraud scandals especially in the award of oil blocs and collection and management of license fees and signature bonus.
The case for a proper legislative empowerment to grant the DPR an autonomous status has become very imperative following the recent scandalous allocation of a highly prospective oil bloc to Starcrest Energy, a company incorporated few days to the bid round. The Starcrest scandal raised so much dust because the company was previously unknown as an oil exploration company and because of the prominence of politicians and businessmen who were identified and linked to President Olusegun Obasanjo as business fronts. Meanwhile, this is just a spec of dust in a desert of irrational allocation or rather rascal emptying of almost all the nation’s lucrative oil blocs.
The sack of the DPR Director Mr Chukwueke which has become part of the oil bloc scandal represents another rascal handling of revenue issues by managers of the nation’s crucial oil and gas sector. Could Chukwueke have awarded an oil bloc to anyone without the approval of both the junior and senior Ministers of Petroleum Resources? Specifically, did the director of DPR unilateral awarded oil bloc OPL 291 to Starcrest Energy or was he simply taking orders from his superiors? Since the inception of this present administration, who has the DPR director been reporting to 0r rather who gives directives to the DPR director?
Was it true as reported, that the minister (junior) ordered Chukwueke to reserve the lucrative OPL 291 oil bloc for the President? Why has the Presidency not issued a statement to clear the insinuations alleging the involvement of President Obasanjo and others in the blocs of oily controversy?
Nigerians at least expected the Presidency to have cleared itself as media reports on the issue quoted some DPR top officials as alleging that “We were told ahead of time, before the May bidding that bloc 291 should not be included in the auction that it was reserved for Emeka Offor and we all know that Emeka Offor is the President Obasanjo’s voice in this office (DPR).
“Whenever he comes to our office, we know he is not here on his personal capacity but with both the minister and the President Obasanjo’s approval so he gets whatever he asks for.”
As part of the unclean deal, the second-hand buyers of the lucrative bloc of controversy claimed that “OPL291 represents the mandatory relinquishment area of OPL216 following conversion of OPL216 to Oil Mining Lease (“OML”) 127 preceding the development of the Agbami field in OML127 by Chevron.” The controversial bloc, OPL291 was tendered by the Nigerian government under the March 2006 mini bid round but was later withdrawn by the Presidency.
However, during the May 2006 auction, 16 acreages were offered and bided for. The lucrative bloc of controversy, OPL 291 was not one of them. It was said to have been reserved for Chief Emeka Offor, an associate of President Olusegun Obasanjo, breaching the principles of international best practices which require such oil blocks to be allocated through open bidding. The allocation also negates the ideals of the Extractive Industry Transparency Initiative (EITI), which Nigeria subscribed in 2003. Remarkably, whatever was said at the onset of the OPL 291 scandal could best be described as mere allegation and the Presidency as part of efforts to clear itself from the mess would have or rather still have to explain its roles in both the withdrawal of the lucrative bloc from earlier bid round and the deliberate removal of the acreage from blocs thrown open for the May 2006 auction. Also, the Presidency need to explain to Nigerians how Starcrest acquired the oil bloc and the series of deals that led to the final sale to Addax Petroleum.
There is another issue that needs to be explained. Addax Petroleum and Starcrest signed a Production Sharing Contract (PSC) with Nigeria National Petroleum Corporation (NNPC) in respect of Oil Prospecting License OPL 291 deepwater offshore Nigeria. Addax Petroleum has a participating interest of 72.5 per cent and is the operator. Who brokered the deal between Addax and Starcrest on one hand and between Addax and NNPC on the other? Did the junior minister of petroleum Dr Dakouru acted on his own in the Production Sharing Agreement between Addax and the NNPC and the farm-out of the bloc by Starcrest to the Canadian oil producer? Could all these deals have gone ahead without the endorsement of President Obasanjo, the substantive minister of petroleum?
“Pursuant to the PSC, Addax Petroleum and Starcrest (i) shall pay a PSC signature bonus to NNPC of US$55 million, (ii) shall undertake an initial investment of US$75 million covering an initial work commitment which comprises the acquisition of 3D seismic and drilling one well and (iii) have entered into a Memorandum of Understanding with NNPC to undertake an investment in an Independent Power Project (“IPP”) which would be developed with gas from a commercial development in OPL291 and agreement with NNPC on the technical and commercial arrangements should the IPP proceed.”
The truth is that Mr Chukwueke’s problem with the “powers that be” started when DPR under the sacked director sent a proposal to the Ministry of Petroleum Resources which of course is the Presidency asking for full autonomy to fully empower the Department to perform its inspectorate functions without the control of the main stream NNPC which also needs to be properly inspected.
Areas such as relinquishments of blocs, appropriate approvals for abandonment as well as revenue and tax issues in the nation’s oil and gas sector are supposed to be strictly DPR matters but have been fraudulently hijacked by the Presidency who acts as both the substantive Minister of Petroleum Resources and sole administrator of the NNPC with even the junior minister having little or no powers at all to take meaningful decisions concerning the oil industry.
The DPR in its proposal had asked to be empowered to impose appropriate penalties on defaulters in the payment of royalties and taxes in addition to tackling the issue of increasing backlog of royalties, taxes and the plethora of fraud scandals or rather improprieties in the allocation of oil blocs and collection of both the licensing fees and signature bonus for all the acreages so far awarded since this present dispensation. This was where the problem of the sack director started from.
The DPR boss was determined to pursue with the seriousness it demands the call for DPR autonomy. He demanded for overriding powers where the interest of the DPR which is under NNPC, overlaps with the NNPC and the abrogation of the ministerial authourity to award or allocate oil blocks. This was actually his problem with the Presidency.
The moment he started puncturing holes into NNPC’s claims and especially demanding for the DPR to be totally in-charge of all agreements in the upstream sector and his insistence on due process, he stepped on powerful toes in the Presidency where the NNPC takes orders from. However, the truth remains that whether the Presidency likes it or not, to achieve transparency and accountability in the nation’s oil and gas sector, DPR as the sectoral police must be independent and free from political manipulations similar to the ones that produced the present mess in the system. #
IFEANYI IZEZE, OKUMAGBA LAYOUT, WARRI, DELTA STATE
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