When I posed that question to the Minister of State, Petroleum Resources, Dr Ibe Kachikwu last week Wednesday afternoon, I was watching out not only for what he would say but also for how he would say it. I had my reasons. As someone who rose to the top in one of the multinational oil companies operating in Nigeria, Kachikwu must know a lot about the management of our oil and gas sector. But he did not dissemble. “Malabu is a mess”, he volunteered, “But it has also presented us opportunities to deal with a lot of issues. We will not destroy the project but clearly, the terms have to be renegotiated.”
However, trouble started on 14th February 2016 when the Forcados oil export line was attacked by some Niger Delta militants under the name “Avengers”. Despite a 30-day ceasefire brokered in the course of the crisis, the next target of attack was the Nembe Creek Trunk line resulting in further shut-in such that by May 2016, the national oil production had been brought to an all time low of 1.4 million barrel per day. That translated into a shut-in of a million barrels per day at a time the price of crude had gone down with Nigeria practically brought to its knees.
With that, Kachikwu developed the Niger Delta Development Action Plan involving dialogue sessions with critical stakeholders while collaborating with the security agencies which, with the approval of President Muhammadu Buhari, became the roadmap for achieving a temporary truce. Vice President Yemi Osinbajo has played a critical role in that effort to restore peace in the Niger Delta.
From the issue of militancy in Niger Delta, (including what to do about Tompolo) to the Petroleum Industry Bill (PIB) to the management of the Federation Account to the infrastructural decay in the oil and gas sector, I had an interesting chat with Kachikwu who explained the challenges that plague the sector as well as the efforts being made to redress them. But against the background of the revelations now coming from the international media about the controversial OPL 245 otherwise known as Malabu, it is evident that Kachikwu has his job cut out for him and he knows.
According to Kachikwu, given the international scandal that the deal has thrown up, it is in the interest of Shell and ENI to sit down with the federal government of Nigeria to chart a clear path forward. “I believe that at some point, the Petroleum Ministry, the Ministry of Justice, the Economic and Financial Crimes Commission (EFCC) as well as representatives of Shell ad ENI would have to sit down in the bid to put a closure to this sordid matter. But to do that, the federal government must extract not only a better deal but also some payments”, said Kachikwu.
That the Malabu scandal is back in the news is no surprise to me. In my piece titled, “Malabu & the $1Billion Bazaar” published on this page on 15th August 2013, I made three important points. One, I predicted that the fight over OPL 245 would be long-drawn, messy and dirty because of the interests involved. With the case now instituted at a Federal High Court in Abuja that has the fingerprints of Mohammed Abacha who was outplayed by Dan Etete, it is clear that this battle has only just started. Two, I said that if after receiving the settlement claims from the Federal Government escrow account at JP Morgan, Etete was found to have paid out bribes to some people, it will not be difficult to establish those involved since money trail is very easy to trace. Three, I argued that Malabu was not an exception in an industry that lacks transparency, it was the rule. In fact, had Abacha not died, there probably would have been no story about Malabu today.
Unfortunately, while the Malabu scandal should compel a rethink on the way we manage our hydrocarbon, I have not seen evidence of that, especially if snippets from the Petroleum Industry Bill (PIB) that may soon be passed by the National Assembly are any guide. And because of that, I am republishing my earlier intervention on Malabu with minimal editing, not only because it explains what the entire deal is all about but also because it raises fundamental points about why it could yet happen again, essentially because as a nation, we hardly learn from our mistakes.
Based on a subsisting motion sponsored in 2012 by former Deputy Majority Leader, Senator Abdul Ningi and 46 other colleagues, the Senate in 2013 directed its committees on Petroleum Resources (Upstream) and Finance, then chaired by Senators Paulker Emmanuel and Ahmed Makarfi respectively, to probe the controversy surrounding the payment of $1.092 billion to Malabu Oil and Gas Limited over OPL 245 oil block. The Senate decision came barely a week after the House of Representatives Ad-hoc committee which investigated the same deal concluded its assignment with damning conclusions.
While the Malabu controversy remains a business deal gone sour in a sector that is lacking in transparency, the circumstances surrounding a tri-partite transaction involving the Federal Government, Shell/Agip and Malabu Oil and Gas Limited in respect of OPL 245 is what has generated the current furore. At the centre of the deal is former Petroleum Minister, Chief Dan Etete and Shell Nigeria Ultra Deep (SNUD), a company incorporated in January 2001 for the sole purpose of operating OPL 245 as a fully-owned subsidiary of Shell. The block in question is located directly between the two major commercial oil discoveries of Agbami (OPL 216/217) and Akpo (OPL 246). OPL 246, for the uninitiated, was awarded also by Abacha in March 1998 to South Atlantic Petroleum (Sapetrol) of which Lt General T.Y. Danjuma is the major stakeholder.
To be sure, the House of Representatives Ad-hoc committee report on Malabu is very revealing of how the resolution arrived at by the federal government may not be in our national interest. But stories making the rounds also suggest that the current rash of probes may be more in the interest of some characters who lost out in the dirty deal than in the interest of Nigerians who were practically gang-raped. For instance, one of the key recommendations of the House report is that Mohammed Abacha, and not Dan Etete, owns the controlling shares in Malabu Oil and Gas. That may indeed be true but it appears that the former Oil Minister has already out-swindled the Abacha family and it should not be our business that people who helped themselves to our national wealth are fighting over the spoils.
What should be of concern to critical stakeholders is that nobody should have the powers to singularly allocate national assets to themselves as it was done by the late Head of State, General Sani Abacha and his minister, Etete, with regards to OPL 245. Yet it would seem that we don’t learn any lesson from our experience which then explains why the Petroleum Industry Bill (PIB) still retains the clause that enabled the duo to award such juicy oil block to themselves. Notwithstanding the subterfuge, Section 191 of the PIB is a clever replication of Section 2 of the 1969 Petroleum Act which vests unrestricted powers in the hands of the Petroleum Minister with regards to “Oil exploration licences, oil prospecting licences and oil mining leases”.
Against the background that it is the abuse of such discretion that has created several idle but rent-dependent overnight billionaires and associated corruption in our system, certain provisions in the current PIB fail the test of credibility. For instance, Section 190 states “There shall be no grant of discretionary awards, except as provided under section 191 of this Act.” Unfortunately, that exceptional clause in section 191 stipulates that “Notwithstanding the provisions of subsection (3) of section 190 or any other provision of this Act, the President shall have the power to grant a licence or lease under this Act.”
Clearly, this new lever for another discretionary power endangers a fair and open bidding process that the Nigerian oil industry truly requires. The discretionary award of oil production licenses that put the Nigerian oil blocks in the hands of Abacha and Etete will happen again if we still vest such powers in the hands of individuals. When Nigerians say that their president “is the most powerful in the world”, what they mean essentially is that he/she has control over the oil industry and can turn a pauper to a billionaire by the stroke of a pen. But is that the way to run a country in this modern era? That is a critical question we need to answer if we are desirous of ever institutionalizing a government that will be both transparent and accountable.
It is indeed instructive that Mrs Oby Ezekwesili provided the institutional template, first with the Nigeria Extractive Industry Transparency Initiative (NEITI) of which she was founding Chairman (this reporter was also a member) and then later as Solid Minerals Minister where she was also instrumental to writing the Nigerian Minerals and Mining Act, 2007 which detaches the office of the Minister and his/her Principal from the award of mining licences. Incidentally, between 2004 and 2007 when we were drafting NEITI Bill as members of the National Stakeholders Working Group under Ezekwesili, discretionary power in the award of acreages was of serious concern to us.
Unfortunately, while the NEITI Act that we eventually succeeded in getting passed requires the Federal Government to conform with the provisions of the Global EITI (which includes a transparent bidding process for acreages), the same NEITI Act added a caveat that all existing long-term contracts must be respected, a last-minute insertion following pressure from the IOCs. But to properly situate how discretionary power has created a culture of rent seeking behaviour that has in turn made our oil and gas sector largely unproductive, we may have to trace thtopics from