In this country, there is a common saying that “when cunny man die, na wayo man go bury -aam.” When the ‘Right of First Refusal’ (ROFR) clause was introduced in oil bloc bid processes by the Obasanjo administration, few of us saw it then as an outright aberration and administrative misdirection packaged only to harm the nation’s oil industry and the economy. In real terms, the initiative was a perversed incentive to undeserving select few Asian newcomers especially those with business relationships with top officials of the administration.
A revisit of the series of awards under the Obasanjo’s oil-for-infrastructure scheme shows that Pramod Mittal’s Global Steel ERM that got Ajaokuta and Delta Steel under mysterious circumstances was granted right of first refusal on Oil Prospecting Leases (OPLs) 225 and 275 and second right of first refusal on OPLs 226 and 290. This company got the right of first and second refusal on high -prospect acreages by promising the federal government that it would construct a 550 metric tones per day offshore gas gathering facility, 550 MW independent power plant (no where) and a compressed natural gas facility in Lagos and Abuja without due consideration to where the natural gas feedstock would come from. If this is not fraud, how else can anybody describe such promise?
In addition, another Mittal’s business interest, Oil India Gas Company Mittal (ONGC/Mittal) also got right of first refusal on OPL 250 by pledging to construct Lagos- Benin- Onitsha- Owerri railway lines.
To have granted ONGC/Mittal ROFR on OPL 250 in 2007 in exchange for a promise to build a railroad was scandalous. Reason: This same company in the 2006 mini-bid round promised to invest $6 billion in a refinery, IPP Project, and the same railroad and got away with two lucrative acreages- OPL 279 and 258. And up till today not even a baseline or impact assessment study has been carried out for any of the projects.
Korea National Oil Corporation (KNOC) accepted to construct Port Harcourt- Maiduguri railway line and as a result was granted the right of first refusal on OPLs 2002, 2003, 2005 and 2009. And in the 2007 bid round, the company and its subsidiaries got OPLs 321 and 323 under the same oil-for-infrastructure scheme.
Remarkably, China National Oil Corporation (CNOC) Nigeria also has right of first refusal on OPLs 2005, 2006 and second right of first refusal on OPL 226, 231, 2001 and 2011. Another subsidiary of the Chinese Government oil and gas interest, China National Petroleum Corporation (CNPC) which agreed to revamp the Kaduna refinery has right of first refusal on four oil blocs in addition to the four given them in the 2006 mini-bid round making it seven in all.
China National Petroleum Corporation (CNPC) and China National Oil Company (CNOC) are part of the vast empire of State Owned Enterprises (SOEs) of the Chinese Government. The Chinese Government despite benefiting from an over-pay-out of over $2 billion for the Nigerian Railways, the Nigerian rail system is still the same shape as the Chinese met it or even worse. In 2006, they got four lucrative oil blocs based on the ROFR that was hinged on their promise to invest $2 billion to revamp the Kaduna Refinery. Their track record for investment is embarrassing. Not a single kobo has been invested in the Kaduna Plant. The Kaduna refinery remained as dead as the Chinese met it until the federal government few months ago embarked on a complete turn-around maintenance of the plant.
Above all, these Asian oil investors did not pay signature bonuses on any of the blocs and those that managed to pay at all, only dropped 10-20 percent of the fee.
When President Umaru Yar’adua took over fron Obasanjo, he ordered a thorough review of the contracts sealed under the oil-for-infrastructure arrangement and it was established that that almost all the Asian ANOCs and even the few Nigerian indigenous players have deliberately refused to honor the infrastructure side of the deal. So he decided to reversed most of the contracts sealed under the scheme.
And in line with the President’s rule of law mantra, the Korean National Oil Company (KNOC) dragged the government to court. Interestingly, KNOC on Thursday August 20, 2009 won the court case against the Federal Government over the revocation of two oil blocks allocated to it under the administration of President Olusegun Obasanjo.
The company also got a perpetually restraining order stopping the federal government from interfering “with the applicants’ (Asian investors and their Nigerian cronies) contractual duties as contemplated in the contract agreement, either through their agents or by themselves.” The ruling was as interesting as the restraining order slammed on government.
The Federal High Court sitting in Abuja said Yar’Adua’s decision to revoke the oil prospecting license was “illegal, unconstitutional and unreasonable in the face of law.”
Justice Mustapha Abdullahi, who presided over the court, said that the plaintiffs including KNOC Nigerian East Oil Company Limited, KNOC Nigerian West Oil Company Limited, Tulip Energy Resources Nigeria Limited and NJ Exploration Limited are entitled to the leases OPLs 321 and 323.
According to Abudullahi, “the President had acted ultra vires in the disputed contract through the Minister of State for Petroleum.” The court held that the President “has no power to void the allocation of OPLs 321 and 323 belonging to the applicants in the manner it was done.”
The court however, explained that “the President has the power to revoke such licenses by virtue of section 5 (1) of the 1999 Constitution of the Federal Republic of Nigeria. But section 2 of the Petroleum Act 1969 confers on the Minister of Petroleum (and not a Minister of State) the power to revoke oil prospecting licenses.” And this is where the real judgment lies.
Now that Justice Abudullahi has ruled that the power of revocation must be exercised in compliance with section 36 of the constitution with respect to fair hearing, Yar’adua should now do it in conformity with stated constitutional procedure because it must be done whether today or tomorrow. In that light, the restraining order that came with the judgment is only for a season. This is the truth.
Umooru! Umooru! Are you there? Good enough that Justice Abudullahi clearly stated that, “If the letter sent to the applicants (Asian investors and their masquerade Nigerian collaborators) had been authored by the senior minister, his finding would have been different.” Now it’s up to the President to act appropriately and Andoaka should wake up his ideas and guide the President properly into Lukman’s office to issue a fresh reversal but this must be after vacating the order of restraint at a higher court.
Like in all good development concepts by the Obasanjo administration, the problem from day one was the absence of a detailed assessment of the grand design to achieve a development dividend through the oil-for-infrastructure scheme with ANOCs. No serious work was done to ascertain the ultimate value and cost to Nigeria.
According to a report by Chatham House, the UK-based institute of International Affairs, “The tragedy is that the deals were not what they seemed. Unspoken political agenda from the Nigerian side and opportunistic agenda from the Asian side undermined what might have been a mutually beneficial arrangement.
“Although the initiative came from Nigeria in the first place, once the blocs were awarded to the ANOCs the initiatives passed into their hands. Nigeria was thereafter trapped by a set of expensive promises with no mechanism to force the ANOCs to deliver on them.
“There were no legally binding agreements that would have tied the development of the oil blocs to the simultaneous delivery of the infrastructure. This was the key weakness of the whole concept.
Most of the projects proposed in the oil-for-infrastructure deal with the Asian investors were poorly conceived and coloured by political considerations. And since the Asians got the lucrative oil blocs, they have neither produced a single barrel of oil nor started a single downstream or infrastructure commitment as agreed.
Walahi! We must recover all the oil blocs awarded under the fraudulent scheme not just OPLs 321 and 323. And if this government fails to do it, a future government will by the grace of God. Enough of this taking Nigeria for a ride!
IFEANYI IZEZE IS AN ABUJA-BASED CONSULTANT ON POLITICAL STRATEGY AND COMMUNICATION ([email protected])
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