Reps ask oil firms to pay N222.45 trillion
By Yakubu Lawal (Lagos) and John-Abba Ogbodo (Abuja)
THE searchlight being beamed by the House of Representatives on the oil sector is yet to be switched off as a fresh report from the adhoc committee investigating operations in the oil sector in the last nine years has directed oil companies to pay outstanding signature bonuses amounting to $1.483 billion (about N222.45 trillion) within six weeks or have their oil blocks' licences revoked.
According to the report, which will be laid before the House this week, as at August 31, 2008, the number of oil blocks awarded from 1999 stands at 45 from which 13 have a total of $648.2 million signature bonus outstanding.
The report also said that on the remaining 32 oil blocks, an additional $835 million was due and recoverable from delayed payment and understatement of signature bonus.
But the Federal Government may have given an Indian firm, Oil and Natural Gas Corporation (ONGC) Videsh Limited (OVL) up till March 6, 2009 to pay about $485 million (about N68.8 billion) signature bonus for two deep offshore oil blocks retrieved from Korean National Oil Company (KNOC) recently by the Nigerian government
"As at 31st August, 2008, signature bonuses outstanding on Production Sharing Contracts (PSCs) executed between 1999 and August 2008 stand at US$1.483 billion. Of the 45 oil blocks on which PSCs were signed within the period under consideration, 13 oil blocks have US$648.2 million still outstanding due to staggered payment schedule as confirmed by DPR.
"On the remaining 32 oil blocks, an additional US850.0 million is due and recoverable not only due to delayed payments but also as a result of manipulation of some payments claimed on the blocks. In some cases, the debts were cancelled merely by understating the signature bonuses accruable on the blocks. Some payments claimed by some awardees could not be traced to the bank statements," the report of the panel headed by Igo Aguma read in part.
The report gave the names of some alleged defaulters in the payment of the signature bonuses. According to the report, OPL 214 was awarded to Esso Expl/Chevron on June 13, 2001 with a total signature bonus of $55 million, of which only $22 million has been paid to date, leaving a balance of $33 million. OPL 324 was awarded to Petroleo Brasiliero/Statoil on December 20, 2001 with a total signature bonus of $35 million while only $20 million has been paid so far. The expiry dates of the licences mentioned above were put at 2011.
Other oil companies that benefited from the awards included Oranto Petroleum Ltd. (OPL320) awarded in March, 2002, with expected signature bonus of $20 million, of which only the sum of $7 million was allegedly paid; Conoco Philips was awarded OPL 313 on June 13, 2002 and paid $33 million of the signature bonus of $63 million; Ocean Energy/NPDC awarded OPL 256 November 7, 2002 and paid $70 million of the signature bonus of $150 million; Ocean Energy Nig. Ltd was awarded OPL 242 on March 10, 2003 with a signature bonus of $32 million out of which only $12 million was paid. The list also includes Shell Nigeria Ultra Deep which was awarded OPL 245 on December 22, 2003 with a total signature bonus of $210 million but paid only $1 million; NNPC/Chevron, Shell, Brasil Oil Services Ltd was awarded OPL 250 but was said not to have paid the full signature bonus.
Chairman of the adhoc committee, Igo Aguma, confirmed to The Guardian that the committee was about submitting its report on signature bonus. He also confirmed the figure of $1.483 billion as outstanding and that the committee recommended a period of six weeks within which the arrears would be paid, failing which the oil blocks would be revoked.
A source at the Department of Petroleum Resources (DPR) told The Guardian that the Indian firm has up to March 6, 2009 to pay for the blocks or forfeit the offer.
"The two blocks in question are controversial blocks because government has just revoked Korean oil company's right to the two blocks, but the Indian firm has to pay the signature bonus amounting to $485 million on or before March 6, 2009 before they can lay claim to the fields," the DPR source said.
The source, who spoke on the condition of anonymity, also noted that the Korean firm had already petitioned the Presidency over the revocation of the blocks.
ONGC Videsh (OVL) is the foreign arm of Indian's state-run Oil and Natural Gas Corp (ONGC). Though ONGC has not made any official statement on this development, an agency report had alluded to the fact that the company may forego two oil blocks as it is unlikely to secured the approval of Indian Cabinet Committee on Economic Affairs (CCEA) for payment of $485 million signature or acceptance fees for the blocks.
Another report revealed that the Indian government might send a delegation to meet with officials of the Ministry of Petroleum Resources and the Presidency in order to negotiate with government with a view to extending the period stipulated for the payment.
Officials of the Indian government team, from investigations, are expected in the country before the end of this month and would also be engaged in the evaluation of investment prospects of the two deepwater oil blocks.
The Guardian learnt that apart from the huge amount involved and the limited time frame given for the payment, two other factors, namely security issues in the Niger Delta and threats by the Korean firm to resort to litigation if diplomatic efforts failed in getting the two blocks back may affect the push by the Indian firm to press ahead with the deal.
Nigeria had last month decided to revert the Blocks 321 and 323 to the Indian firm, which is to make cash payment of $485 million signature bonus in 60-days.
According to an agency report, the CCEA would have to be convinced about validity of the investment particularly as the blocks were snatched from a Korean group and may potentially involve litigation. OVL would need the CCEA's approval before making such payment, which amounts to about Rs 2,360 crore Indian currency. "We have not yet formally communicated our decision to the Nigerian authorities but in all likelihood, the decision would be to decline the offer," an official of OVL was quoted to have stated.
The company had in August 2005 won Blocks 321 and 323, which hold in place reserves of two billion barrels each, committing $485 million in signing amount. But Nigeria awarded the blocks to KNOC-led group on the basis that the Korean firm had a Right of First Refusal (RFR) on the blocks.
The Ministry of Petroleum Resources on January 6 wrote to the Indian firm that the two blocks would be restored to the company if it paid the $485 million signature bonus in full within 60 days.
OVL, United Kingdom-based Equator Exploration and Nigerian Company Owel E&P Ltd had in 2005 made the winning offer of about $175 million signature bonus for Block 321 and $310 million for Block 323. But KNOC exercised a right of first refusal, which it had secured in lieu of downstream investment commitments.
Nigeria awarded 60 per cent stake in the two blocks to KNOC and gave a 30 per cent interest to OVL and its partners. The remaining 10per cent was awarded to local companies. OVL refused the offer and the 30 per cent share in the Gulf of Guinea blocks was taken by Equator, the official said.
