20 February 2014, Sweetcrude, Abuja – Attorney General of the Federation, AGF, and Minister of Justice, Mohammed Bello Adoke, has said that the Nigerian National Petroleum Corporation, NNPC, can legitimately transfer its participating interest in oil mining leases, OML, to its wholly owned subsidiary, the Nigerian Petroleum Development Company, NPDC.
According to a statement by the NNPC, the AGF provided the legal position during the investigative hearing of the Senate Committee on Finance on the alleged unmerited $49.8bn oil revenue in respect of the status of $6bn NPDC gross revenue which the suspended CBN Governor, Mallam Sanusi Lamido Sanusi, had alleged should have been remitted to the Federation Account by NNPC.
Mr. Adoke informed that it is instructive to note that by virtue of paragraph 14 to 16 of the First Schedule of the Petroleum Act, CAP.P.10 Laws of the Federation of Nigeria, LFN, 2004 (NNPC Act) and Regulation 4 of the Petroleum (Drilling and Productions) Regulations 1969 as amended, a holder of an OML or Oil Prospecting License (OPL) can assign its interest provided the consent of the Minister of Petroleum Resources is obtained.
“Furthermore, section 6(1)(C) of the NNPC Act empowers the NNPC to establish and maintain subsidiaries for the discharge of its functions. The NPDC was thus incorporated as a limited liability upstream company of NNPC to carry out its upstream operations as envisaged by the law,” Adoke submitted.
He added that it is pertinent to note that the transfer of the participating interests in the OMLs in question, relates to a joint venture arrangement between NNPC, on the one hand and Shell Petroleum Development Company of Nigeria ltd, Nigerian Agip Oil Company Ltd (AGIP) and Total E & P (Nigeria) Limited on the other hand.
On whether all revenues derived by the NNPC from upstream operations including those under which OMLs in the JV operations are payable to the Federation Account, Adoke posited that NNPC is generally under an obligation to remit its revenue from the upstream petroleum operations into the federation account.
According to him, this is however dependent on the definition of ‘revenue’ within the meaning and intendment of section 162 (10) (c) of the constitution of the Constitution of the Federal Republic of Nigeria 1999 (Constitution) saying that the NNPC can by virtue of section 7(4) of the NNPC Act defray all expenses incurred in the course of its business in the upstream operations.
The AGF stated that the NNPC is required to pay into the Federation Account the ‘net revenue’ as opposed to the ‘gross revenue’.
“Iam therefore of the respectful view that only the net revenue from the upstream petroleum operations of the NPDC should be paid into the federation account by the NNPC. This is more so as the federating units do not contribute to the funding of upstream petroleum operations of the NNPC and its subsidiary,” he affirmed.
The AGF and Minister of Justice requested for more time to give his legal opinion on whether due process was followed by the NPDC in engaging Strategic Partners for the funding and operation of the oil blocks assigned to it by NNPC.
It would be recalled that upon the conclusion of the work of the Inter-Agency Committee which reconciled the outstanding $10.8bn last week and cleared NNPC of the allegation of withholding money meant for the Federation Account, the Minister of Finance and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala requested the Senate Committee on Finance to seek for legal interpretation of the status of NPDC and whether all its revenues are payable to the Federation Account as well the legality of the Strategic Partnership it entered into with some private companies.