Diezanigate: How Allison-Madueke robbed Nigeria of $1.5b in her last days as minister

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Just two days before the federal cabinet dissolved to allow President Goodluck Jonathan appoint a fresh one in recognition of his new electoral mandate, officials in charge of our oil and gas resources secretly signed a deal assigning production rights in at least two large oil blocks to a shadowy company with no prior experience and no fixed address.

alison-maduekeUnder the direction and with the approval of then petroleum minister Diezani Allison-Madueke, the officials with a magic wave of a pen effectively transferred hundreds of millions of US dollars - possibly billions - in public assets to private individuals without a public tender.

The deal is in apparent violation of Nigeria's Public Procurement Act, which forbids no-tender bids for the procurement of goods and services by any government-owned institution under penalty of imprisonment.

The former Speaker of the House of Representatives, Dimeji Bankole, has been arrested and remains in detention in part for allegedly violating the same law. Mr Bankole faces up to 10 years in prison if found guilty of those particular charges.

The man at the heart of this strange and secretive deal is one Jide Omokore, chairman of a company not yet a year old and which has never produced a barrel of oil. The company, Atlantic Energy Drilling Concept Limited, is the beneficiary of this gift by Mrs Allison-Madueke. For paying to the Nigerian Petroleum Development Company, a fully owned subsidiary of the Nigerian National Petroleum Company (of which Mrs Allison-Madueke, as minister, was chairman) an initial "entrance fee" of slightly more than $50 million for each of the two oil fields, Atlantic now has effective control of the NPDC's 55 percent stake in the oil block. These are rick blocks known in the industry as OML 30 and 34.

 

 

Shell, the giant multinational that produces around 50 percent of all of Nigeria's crude, is the beneficial owner of the remaining 45 percent of the blocks. Shell had subjected its share of these oil blocks to an open and transparent competitive bidding process, fetching up to $1.3 billion in a single field. By comparison, Mrs Allison-Madueke's no-bid approach via a so-called "Strategic Alliance Agreement" fetches the federation account an upfront cash payment of little more than $50 million. The true market value, if the Shell approach had been followed, would have been upwards of $1.5 billion.

 

Mrs Allison-Madueke has shut out established industry players, including local companies, by opting for these secret deals. The transcripts of these "strategic alliance" agreements can be found below.

As she campaigns furiously for reappointment into Mr Jonathan's cabinet, whose nominees may be sent to the Senate for approval as early as this week, Mrs Allison-Madueke has become a major political burden for the president. Her presence in the new government is certain to prove a distraction to the president, who has expressed a strong determination to steer the country away from its persistent underperformance and avarice. As in the past, all attempts to reach Mrs Allison-Madueke for comment were rebuffed. She has said elsewhere that she did nothing wrong and threatens to sue us for exposing these deals.

"The question is why?" said one prominent energy sector source. "Why these particular companies and these particular individuals? Why do these deals secretly? Why deny experienced industry players the opportunity to bid for the same contracts?"

Connecting the dots

Mr Omokore, as chairman of Atlantic Energy, similarly got a sweetheart no-bid deal from Mrs Allison-Madueke in three other oil blocks, as detailed in our report last week. Mr Omokore also is a part-owner of Seven Energy. Septa's managing director, Kola Aluko, also is a director of VistaJet, the private jet leasing company. VistaJet has provided private jets for Mrs Allison-Madueke's use, including as recently as last month, to the annual international petroleum conference in Houston, Texas.

Seven Energy, through its lawyer, Femi Falana, who also acts on behalf of the NNPC, has served notice to this newspaper that it intends to file a lawsuit against us. Phillip Ihenacho, chairman of Seven Energy, has told our reporter that his company has conducted itself honourably and legally in the no-tender transaction approved for his firm by Mrs Allison-Madueke. What is more, an oil trading company controlled by Mr Omokore, called SPOG, faces accusations of fraud in a petition to the office of the attorney general and minister of justice. SPOG is alleged to have, on at least one occasion, imported 3,000 metric tonnes of refined petroleum but claimed subsidy refunds on 13,000 metric tonnes from the PPPRA, the petroleum pricing agency under Mrs Allison-Madueke's supervision. The payoff from that single alleged inflated transaction was N400 million.

Mr Omokore did not respond directly to our inquiries. Atlantic Energy was incorporated only in July last year. As far as we can determine, it has no office or personnel. In its registration documents, the company gave Plot 1267, Ahmadu Bello Way, Abuja as its official address. But our inquiries established that no such company has ever operated out of that location. The company has also never executed a single oil-related contract, undertaken any project, or produced one barrel of crude since it was registered under the names of three people who claim to live in the same address listed as the company's offices.

But it was to this shadowy and inexperienced company that Mrs Allison-Madueke turned for operating rights to two of the most lucrative oil blocks in Nigeria three days before the end of the last administration. Just hours before she attended her last cabinet meeting on Wednesday, May 25, Mrs Allison-Madueke's subordinates, with her approval, basically handed over OMLs 30 and 34 to this barely functional company Atlantic Energy to fund the Nigerian Petroleum Development Co's share of expenditure in exchange for recovering its cost and sharing profits.

Assigning the blocks without open, competitive bidding appears to be a clear violation of industry guidelines, which demand that allocation of oil blocks and the award of service contracts shall be based on an open competitive bidding process to allow every investor, indigenous or foreign, an equal opportunity to explore and develop Nigeria's petroleum resources. The arrangement also seems a violation of the Public Procurement Act 2007, which regulates all procurements by ministries and agencies of the Nigerian government. Officials breaching this law risk a term of imprisonment of between five and 10 years without an option of fine.

The former minister and spokesperson of the NNPC did not return calls or text messages seeking comment. The Department of Petroleum Resources, the agency statutorily charged with supervising all petroleum industry operations being carried out under licenses and leases in order to ensure compliance with the applicable laws and regulations, requested an emailed enquiry but eventually did not respond to our reporter's questions.

Sweetheart deals

The multiple controversial deals in which the former minister is embroiled has made it all but impossible for the president to reappoint her, according to highly placed political leaders. Atlantic Energy's deal with the NPDC to provide financial and technical services in respect of its 55 percent stake in the lucrative OML 30 is perhaps the most astonishing example of these deals shrouded in secrecy. Shell is selling its 45 percent shareholding in the block, after an elaborative competitive bidding process, to Mike Adenuga's Conoil for $1.3bn. For a field that is so lucrative that it yielded 45,000bbl of crude per day in April, Mrs Allison-Madueke's favourite company is to pay, as entrance fee 30 cents per barrel of oil to the Nigerian government and two cents for gas equivalent.

Industry players are aghast

"These people are truly audacious; I have never seen anything like it," said one industry operator who asked not to be identified for fear of jeopardising business relationships with the all-powerful petroleum ministry and the NNPC. A similar deal, hurriedly packaged and finalized on May 25, was signed with Atlantic in respect of OML 34, where Shell also is selling its 45 percent to the Niger Delta Energy and Petroleum Company for $600 million. Earlier in September, the former minister had entered into a service contract with Seven Energy International Limited, through its Nigerian subsidiary, Septa Energy Nigeria Limited, in respect of OML 4, 38, and 41. According to the agreement signed with the company, the firm is to pay a "paltry" $54 million as entrance fee for participating in the three blocks which has Seplat Exploration Production Company as operator. The company will also recover its cost and share profits with NPDC. It can lift crude from the fields and keep the entire proceeds of its sale abroad, contrary to the guideline that requires companies to keep at least 10 percent of their proceeds in Nigerian banks. In a memo to its stakeholders after NEXT broke the story of its deal with the NPDC last week, Seven Energy claimed that its strategic alliance agreement in respect of the three blocks was "modeled after valid service contracts with oil majors in the past." But NEXT's investigation indicates this claim is untrue.

The NNPC acted right in the past

In 2001, NPDC and Agip Energy went into a service contract agreement for the development of OPL 91 (now known as OML 119) - Okono and Okpohu fields - under a joint operatorship. This newspaper can confirm that Agip won the contract after an open, competitive bidding process. The NNPC had at the time advertised in December 1999 for a partner to develop new fields in the block, which is in about 100 meters water depth, and located in the southeastern Niger Delta. The corporation received applications until December 31, 1999, after which it declared Agip the winner of the bid.

"So if NPDC could follow due process 10 years ago, what has changed now?" said a senior official in the NNPC. "Why must they give away assets belonging to the Nigerian people in such a non-transparent way especially when the country now has a procurement law in place?"

A member of the recently defunct Senate Committee on Petroleum (Upstream), which undertook to investigate Mrs Allison-Madueke but was stymied, argued that what the minister did was a tactical reintroduction of single-source procurement abolished in the industry in 2004.

"Single-source negotiation contract has been discontinued in the country since the days of Edmund Dakouru as minister," said the source, who did not want to be specifically identified for fear of reprisal. "It was discontinued because it was causing a lot of fraud. It is shocking that the practice resurfaced under Diezani."


Thine deal be done

As a key figure in this web of secretive arrangements, Mr Omokore cuts an astonishing figure. A wealthy businessman and politician,

his Energy Resources Group has an 11 percent stake in Seven Energy International Limited, owners of Septa. Having swung OML 4, 38 and 41 in Septa's favour, Mr Omokore's coup de grace was to corner OMLs 30 and 34, using the newly formed Atlantic Energy. Company documents give Messrs Albert Bassey Akpan, Bankole Opashi and Sanni Mohammed as shareholders and directors of the firm, a veritable WaZoBia of ethnic balancing. But when time came to sign the controversial agreement with NPDC, Mr Omokore emerged, signing as chairman of the company. Atlantic also gave its registered address as Plot 1267 Ahmadu Bello Way, Abuja, which is a former location for one of Mr Omokore's numerous companies, SPOG Petroleum, which has now moved to Millennium Builder's Plaza in central Abuja. Chijioke Isiolu, the Atlantic Energy company secretary, told our reporter that his company is competent to execute the contract awarded to it because it has a sister company in Seven Energy. Mr Omokore was not available for comment. When our reporter called his Abuja office, an official simply directed enquiries at Mr Isiolu, whom he said could speak on Mr Omokore's behalf. Mr Isiolu later said on the telephone that the allegations against Mr Omokore were false. He promised to provide further information if our reporter could agree to a meeting, not in his office but at unspecified location.

Mrs Allison-Madueke is not officially connected to Seven Energy, but she does indirectly enjoy the hospitality of the company. In June 2010, Vistajet, the UK-based private aviation company, extended its operation to Nigeria through an alliance with Seven Energy. Sources said Vistajet Nigeria, headed by Kola Aluko, one of the owners of Seven Energy and the managing director of its Nigerian subsidiary, Septa Energy, routinely provides a private jet for the minister's convenience, including her trip to the Offshore Technology Conference in Houston last month. Mrs Allison-Madueke accepted this expensive hospitality as she was approving the secret no-bid deal to assign production rights in the oil blocks to Septa, Atlantic and Seven Energy - an apparent contravention of section 6 of the fifth schedule of our constitution.

The constitution stipulates that: "A public officer shall not ask for or accept property or benefits of any kind for himself or any other person on account of anything done or omitted to be done by him in the discharge of his duties. For the purposes of sub-paragraph (1) of this paragraph, the receipt by a public officer of any gifts or benefits from commercial wfirms, business enterprises or persons who have contracts with the government shall be presumed to have been received in contravention of the said sub-paragraph unless the contrary is proved."

Click to download

Strategic Alliance Agreement for OML 4 38 and 41

Service contract between NNPC and Agip

Strategic Alliance Agreement for OML 30

Strategic Alliance Agreement for OML 34

 

Questions for former minister, Allison-Madueke

Why enter into discreet oil blocks operatorship contract with selected companies without regard for open and competitive bids, as mandated by the Public Procurement Act 2007?

Why approve companies with questionable antecedents to become discrete beneficiaries of oil blocs?

Why the rush to approve oil bloc deals days before President Jonathan's inauguration and the dissolution of the Federal Executive Council?

Why were companies which have interests in each other- Seven Energy and Atlantic Energy - favoured to manage oil blocks OMLs 4, 30, 34, 38 and 41?

Why did you have to violate industry guidelines and the Procurement law to favour these companies?

How many companies did you approve Strategic Alliance Agreements with NPDC to develop OPLs and OMLs?

How do these agreements which are selective with no known criteria support transparency, accountability and national interest when it is not all-inclusive?

Why did you fly to Houston in a jet provided by Seven Energy, a company offering service to an agency you supervised?

With all these disclosures about the way you ran the petroleum ministry, do you think you deserve to be reappointed to President Goodluck Jonathan's cabinet?

What the procurement law states:

Under the fundamental principles for procurements, section 16 of the Public Procurement Act, subsection 1, states that:

subject to any exemption allowed by this Act, all public procurements shall be conducted:

(c) by open competitive bidding; and

(d) in a manner which is transparent, timely, equitable for ensuring accountability and conformity with this Act and regulations therein.

The section for procurement of services, such as that rendered to the NPDC by SEPTA and Atlantic Energy is Part VIII, section 44 of the Act. This states that:

“where a procuring entity wishes to procure services for its needs which are precise and ascertainable:

(a) It shall solicit for expressions of interest or applications to pre-qualify to provide the services by publishing a notice to that effect in at least two national newspapers and the procurement journal.

In terms of punishment, the Procurement Act states in Part 12, section 5, that any person who, while carrying out his duties as an officer of the Bureau or any procuring entity contravenes any provision of this Act, commits an offence and is liable on conviction to a cumulative punishment of:

(a) a term of imprisonment not less than five calendar years without any option of fine; and

(b) summary dismissal from government services.

Additional information from 234Next.com

Disclaimer: Articles here are purely the opinions of the writers and not in any way representations of the views of 'Transparency For Nigeria'


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