A Review of the Nigerian Energy Industry

India, Dieziani and dirty oil

12 September 2015, Lagos – Nigeria’s immediate past minister of petroleum, Mrs. Diezani Alison-Madueke, represents much that is good or bad about the administration of Goodluck Jonathan which she served for five years. In office many loved to hate her. Out of office few hate to love her. Her dilemma is compounded by alleged oily ooze of scandals shooting from the chimney of her stewardship. Brilliant but cocky, she has been buffeted from all sides since leaving the plum job. Even India recently joined in the pummelling.

Mrs. Alison-Madueke

Being the biggest buyer of Nigeria’s crude oil currently, an allegation by the Indian High Commissioner to Nigeria, Mr. Ajjampur Ghanashyam about corruption in the oil sector under Diezani as it affected his country can hardly be dismissed with the wave of a hand. The High Commissioner accused the former minister of frustrating an oil concession deal by a Joint Venture (JV) consortium from his country.

In a report in Daily Trust newspaper of August 23, 2015, he alleged that Diezani sat on the concession application by the JV – Oil and Natural Gas Commission Videsh Limited (OVL) and Mittal Energy International – after a $25million signature bonus had been paid since 2006. Apparently irked by the nine years drag on the ill-fated deal, he somewhat lowered his diplomatic guards and told the newspaper: “For nine years your country has been sitting on this, and they make us go round and round and round.

Even to get the concession is not possible, and the money is not refunded to us.” In another breath, Mr. Ghanashyam accused the former minister of circumventing global best practices by using intermediaries to receive payments for crude oil purchased from Nigeria by India. He was quoted to have said: “From other countries, when we buy oil, whatever we want to pay, we pay to the Ministry of Finance of that country. In Nigeria, we pay to intermediaries. We would like to be dealing directly with the Nigeria National Petroleum Corporation (NNPC). It’s not a good thing. Why should we go through intermediaries? We buy $15 billion worth of crude oil per year and we have the potential of importing $50 billion worth of crude oil from Nigeria.

We can buy more because our requirement is going up. But if you continue to make us to pay through agents, and continue to ask us to buy from the swap market, it means you don’t trust us, and if you don’t trust us, we have to look for those who trust us more.” While those baying for Diezani’s blood hailed the outburst of the High Commissioner, objective observers of diplomatic practice would argue that such vituperations should hardly have come from a senior diplomat to a newspaper as the grievances expressed ought to be communicated and addressed through appropriate diplomatic channels. Especially when the new sheriff in town has never hidden his desire to slay corruption and punish the corrupt. President Buhari would be too happy to receive credible reports of sleaze against public officials, past or present.
In any case, the weighty allegations were enough to draw the ire of the former minister as the usually taciturn and snobbish Diezani fired back with a furious roar. She dismissed the High Commissioner’s stories as half-truths, spurious and a tissue of concocted libel designed to bring her to disrepute. The response through her lawyers, Messers Chike Amobi and Co., threw brickbats at the diplomat saying his attack was because she had resisted moves by the Indian companies to default on their obligations including a commitment to undertake a $6 billion Greenfield refinery project.

To further dispel the allegations, Diezani said the concession was called off due to inability of the companies’ subsidiary, EMO Exploration and Production to meet cash obligation. Stating that though the transaction predated her tenure in office, she did recommend a refund to the Indians at the twilight of her tenure as minister. On the allegation of using intermediaries to transact crude oil sales to India, Diezani said the diplomat simply played to the gallery as such transactions were guided by established procedures which predated her tenure.

According to the statement, Mr. Ghanashyam acted in a manner unbecoming of a diplomat “by officiously spreading false and misleading information calculated to malign Nigerian public officials,” adding: “We believe the conduct of Mr. Ghanashyam is aimed at damaging our client’s reputation for her insistence on protecting the interests of the people of the Federal Republic of Nigeria, and for not acceding to inappropriate requests of his country to be relieved of its contractual obligations to Nigeria.” The Indian envoy is yet to respond to Diezani’s rejoinder the last time I checked. And this could leave a credibility burden on him and by extension, his country. Perhaps he has been availed the benefit of better counsel on how to deal with the hornet’s nest he stirred.

Unfortunately however leaving some questions unanswered may not be in the best interest of India in a matter as sensitive as alleged dirty oil deals. But that does not also make Diezani automatically free of any possible culpability in the matter though that is a nut for the probe-prone government of President Buhari to crack. And of course, the former minister is a prominent and prime target of a rash of probes that are daily announced by the administration. As one who presided over the NNPC once described by a key figure of the ruling party as the ATM of the presidency and the entire oil and gas industry in the country, she was one of the most powerful figures of the Jonathan administration. And she grew internationally powerful enough to become president of the Organization of Petroleum Exporting Countries (OPEC).
Incidentally, Mr. Ghanashyam’s tackles on Diezani introduces another dimension to the never-ending controversies trailing her tenure. From alleged corrupt subsidy payments on petroleum products running into billions of naira to questionable product importation policies and her legendary obstinacy against legal and statutory inquisition, Diezani exploited the powers of her office and influence in the presidential villa without let. As it is now seemingly turning out, she over-stepped her bounds sometimes. Her contraptions called crude oil swap and Offshore Processing Agreements (OPA) for instance, had always come under heavy scrutiny and criticisms by observers, critics and cynics.

The oil swap contrivance involved granting licenses to select marketing companies to lift crude upstream, sell the product in the international market and use the proceeds to import Premium Motor Spirit (PMS) for consumption throughout country. The (OPA) contracts with select traders to lift some 210,000 barrels of crude per day and return the proceeds in kind as petroleum products imported on a pre-determined ratio was described by many as a scam and official cover for oil theft.

A review of Diezani’s oil schemes by the new management of the NNPC under Mr. Ibe Kachikwu has led to their cancellation and a toppling of the applecart. The NNPC in a statement last month said it cancelled the OPA contracts “after detailed appraisal of the operation and its terms of agreement” and being “convinced that the current OPA is skewed in favour of the companies such that the value of product delivered is significantly lower than the value of crude oil allocated for the programme.” These reversals of Diezani’s controversial policies coupled with the renewed vigour being shown in the fight against oil theft by the Buhari administration have been described as welcome development.

India would do well to key into the mood more appropriately instead of blowing hot airs in the media that tend to fester more controversies. And for oil transparency watchdogs like Seal the Crude programme and the Nigeria Extractive Industry Transparency Initiative (NEITI), this is the right time to help plug the leaks in the oil industry in a more productive manner.



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