What may have caused a huge international embarrassment and litigation was averted last Friday, as President Muhammadu Buhari ordered the restoration of Oil Mining Leases (OMLs) 123, 124, 126 And 137 to the Nigerian National Petroleum Corporation (the concessionaire), which is in a Production Sharing Contract (PSC) with its contractor, Addax Petroleum Exploration Nigeria Limited (a Chinese company), on the blocks.Trouble started on March 30, 2021, when the Director/Chief Executive Officer, Department of Petroleum Resources (DPR), Mr. Sarki Auwalu announced the revocation of the four OMLs belonging to Addax Petroleum due to the poor development of the assets by the petroleum company for many years.
He specifically noted that over 50 per cent of the assets had remained underdeveloped, a development he said robbed the Nigerian government the needed revenue to run a country in dire straits. He said: “Addax refused to develop the assets and Addax were therefore not operating the assets.”Auwalu, however, explained that the revocation was not an arbitrary action but drew its strength from Nigeria’s Petroleum Act.
“The first reason for a revocation is when you discover that the asset is not being developed according to the business guidelines, because it is economic sabotage.”While that simmered, the DPR boss announced the inauguration of a team of experts (a committee) to evaluate the four oil mining licenses revoked and recovered from Addax Petroleum Exploration Nigeria Limited. He awarded them to a new operator– Kaztech/Slavic Consortium.The oil sector regulator noted that the move was in fulfilment of the Federal Government’s commitment to reviving all moribund oil and gas support assets across the country.
Auwalu stated that the prevailing development was meant to stimulate the economy and create job opportunities for Nigerians, especially as the oil and gas industry remains the major economic pillar of the country.
He thus charged the committee to evaluate the current status (As-is) of the revoked assets, including liabilities post revocation, in order to facilitate takeover of the assets by the newly appointed operators of the assets.
He further urged that committee to discharge the responsibility entrusted on them by the nation with all sense of patriotism and dedication to national interest. According to him, the committee has one week to conclude the assignment. However, while the committee got down to business, President Muhammadu Buhari, who doubles as the Minister of Petroleum Resources nullified DPR’s actions, which automatically sacked the new operator anointed by the regulator–Kaztech/Slavic Consortium.
Nonetheless, experts who weighed in on the matter described Buhari’s actions as victory against Prebendalism, though they wondered whose script DPR played by announcing an unripe revocation in the first instance.Going by the dictates of the Petroleum Act, the revocation of an oil mining lease is the exclusive preserve of the Minister of Petroleum Resources as enshrined in Paragraph 25 (1) of the First schedule of the Act.
Based on the Act’s provisions, the Minister of Petroleum Resources through the regulator (DPR) is to inform the Licensee of the infractions and give the Licensee time to respond or rectify the situation prior to such revocation.
Industry watchers note that with respect of the revocation, these stipulated provisions were not adhered as NNPC (the licensee) only got to know about the revocation from a rumour that started in social media then subsequently confirmed by a letter from the DPR addressed to Addax.
The above provisions state that revocation of a lease is against the lessee and not on the contractor. Clearly, DPR clearly by processing the revocation against Addax (PSC Contractor).
Furthermore, experts insist that DPR ought to inform NNPC of any infractions in relation to the operation of lease and afforded adequate time to provide appropriate explanations on the said infractions as well as reasonable time to remedy the alleged infractions. It means that the proper procedure for revocation would have been to direct the revocation to NNPC. NNPC will then be obligated to properly communicate the situation to the PSC Contractor and terminate the PSC on the basis that the underlying leases have been revoked.
Analysts note that if the procedural error was allowed to stand, it could have led to a serious legal dispute if Addax had commenced legal action against NNPC and the Federal Government.
They added that President Buhari’s intervention saved the nation from another embarrassment after the 2017 KNOCs case where the Supreme Court ruled that the decision of the Federal Government under President Yar’adua to void the allocation of Oil Prospecting Licenses (OPLs) 321 and 323 to the Korea National Oil Corporation (KNOC) and re-award the oil blocks to ONGC/Owel Petroleum Consortium as illegal, procedurally unfair, unreasonable, and against the legitimate expectation of KNOC.
Commenting on the development, an oil and gas industry consultant and immediate past Chairman, Society of Petroleum Engineers, Nigeria Council, Joseph Nwakwue said President Buhari’s intervention was laudable, though he picked holes in the action of DPR to have revoked the OMLs ab initio.
Did DPR seek clearance from the Minister of Petroleum Resources (President Muhammadu Buhari) before the contract was revoked? If yes, what then changed? Who pressured Nigeria to backtrack? Was it the NNPC or Chinese Government? If the DPR man didn’t secure the President’s nod before the revocation? Why does he still have his job? This is an international embarrassment and we should not be behaving this way?
“These are issues we should interrogate. Those responsible should be held accountable. For me, I’m of the opinion that the contract should have been allowed to expire, especially when we’re already close to the expiry date being 2023.
“There are several reasons a contract is revoked. Non-performance is just one of them. There could be other infractions. But in this case, I am against the revocation because the expiration is near”, he said.However, a statement from the Presidency said Buhari’s intervention was an affirmation of his administration’s commitment to the rule of law, fairness and enabling a stable business climate for investment and investors.The Presidency statement read: “It is clear that the procedures governing the revocation of lease(s) in the Petroleum Act were not duly followed in this case and Mr. President had to step in to ensure justice and fairplay is done, which are cardinal principles of this administration.
“This development will indeed go a long way to reaffirm the confidence of foreign investors in the polity and also re-affirm the position of Nigeria as a desirable investment destination in the continent where sanctity of contract is respected.”
President Buhari directed the Department of Petroleum Resources ( DPR) to retract the letter of revocation of leases.He also directed the NNPC to utilise contractual provisions to resolve issues relating to the NNPC/Addax PSC in line with the extant provisions of the Production Sharing Contract arrangement between NNPC and Addax.