NPDC may lose $2bn revenue in controversial agreement

NNPC towers

NNPC Towers

21 May 2015, Abuja – The controversial oil lifting deal between the Nigerian Petroleum Development Company, a subsidiary of the Nigerian National Petroleum Corporation, NNPC, and Atlantic Energy Drilling Concept Nigeria Limited has continued to spike concern over possible revenue loss of about $2.1 billion (N400 billion) to government.

The deal was sealed in 2010, the same year the company (Atlantic Energy) was officially registered in Nigeria. Under the agreement, AEDC would provide funding and technical services to NPDC for the development of both the oil and gas reserves in its licenses without transferring ownership of any interest on the company.

Documents available indicates that the deal involved OMLs 26, 30, 34 and 42, where Atlantic Energy will assist NPDC to fund its entire capital expenditure obligation, amounting to 55 per cent and receive a tiered share of production above the baseline amount, depending on how well the two companies are able to increase production and develop the assets.

But since 2011, a year after the agreement was reached; the Atlantic Energy began to default in funding which accumulated to $2.1billion in four years.

Sources at NNPC told Daily Trust that all efforts to terminate the agreement and recover the missing money for government proved abortive as some top officials are backing the deal.

The sources said in February 2014 government forced NPDC to renew the deal despite recommendation to the contrary.

One of the owners of Atlantic Energy, Mr. Omokore Jide, is said to be one of President Goodluck Jonathan’s and Minister of Petroleum Resources’ Diezani Alison-Madueke’s closest business associate.

Kogi-born Jide has featured prominently in the recent fuel subsidy scandal that rocked the Nigerian economy.

The document revealed that even the entry agreement fee of about $0.46 billion (N98 billion) was not paid by the company for the four OMLs.

With the renewal of the agreement, Daily Trust learnt that the company is currently operating 8 OMLs that is estimated to generate one billion dollars annually.

AEDC also failed to provide about $11,200,000 (N2.2 billion) training fee for the staff of the NPDC within the last four years. “This breach alone is enough ground to terminate the agreement,” the source said.

Currently the NPDC staff are on strike to protest such agreements that have held the company to ransom.

A statement recently jointly signed by spokesman of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), NPDC branch, Mr Ekori G. and that of the National Union Petroleum and Natural Gas Workers (NUPENG) Mr Ogbomo P. explained that the NPDC/AEDC deal was done in bad faith.

According to the union leaders: “They were concocted, not because NPDC could not generate enough funds to meet its financial obligations, but because certain interests in higher places wanted it as a means to drain our resources.

“It is in record that since the SAA was signed, AEDC has committed only $300million to the agreement, leaving huge debt of $2.1billion.” the unions said.

Mr Dauda Garuba, Nigeria Programme Coordinator for Natural Resource Governance said the arrangement is taking us back to the core issue the former CBN governor, Sanusi Lamido Sanusi raised in his letter to Mr President. Unfortunately, the country keeps focusing on the issue of missing $20 billion only and not at such as this one which he also raised in the same letter.

Also commenting, Professor Charles O. Ofoegbu an oil and gas expert and former NNPC staff wondered why the delay in terminating such agreement by government despite four years defaults.

When contacted officials of both NPDC and NNPC refused to comment on the issues. The NNPC spokesman, Mr Ohi Alegbe said when contacted, said “I am sorry. I am unable to respond to your inquiries.”

The AEDC after two emails, responded that: “We will provide a response by close of business Thursday (tomorrow).”

Reacting on behalf of the AEDC, Dayo Okusami said they are not in default regarding payments.

He said: “We had a dispute with NPDC regarding the interpretation of the SAA and withheld payments of cash calls until the settlement of the agreement.

“On NPDC’s part they suspended lifting, so we are not lifting crude oil while the dispute has lasted.

“We have however settled the dispute and payments will resume after which lifting will resume as provided for under the SAA.”

On the total indebtedness, he said: “we are not indebted to NPDC to the tune of $2.1 Billion.”

“And that the training amount is $350,000/year per SAA, so the amount you’ve stated is incorrect.
*Hamisu Muhammad – Daily Trust

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  • Chiemele

    This is for the ethnic bigots on both sides. Mr. Omokore Jide i not from Niger Delta. Politicians are not tribalistic when it comes to looting. Why are we when it comes to nailing them?