What Can We Learn from Malabu?
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.”
My interaction with Kachikwu was at his office, having been invited to meet him by a mutual friend. I listened as he explained the challenges he has had to confront in the sector ever since he was appointed, first as the Nigeria National Petroleum Corporation (NNPC) Group Managing Director in August 2015 before he got the additional responsibility of a ministerial portfolio four months later in November. He said when he assumed office, things were going smoothly such that by the 29th of January 2016 the national oil production peaked at 2.38 million barrel per day.
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 on 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 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 ivolved 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.
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.
The story began in April 1998, about three months before Abacha’s death when he decided to manipulate the Indigenous Exploration Programme Policy to award certain oil blocks to cronies who would act on his behalf and themselves. By the filings at the Corporate Affairs Commission (CAC) on 18th April 1998, the share capital for Malabu Oil and Gas Company that was handed OPL 245 was N20 million, divided into 20 million ordinary shares of N1 each. The shareholdings were distributed as follows: Mohammed Sani, better known as Mohammed Abacha, son of the late Head of State: 50 per cent or 10 million ordinary shares; Kweku Amafagha, representing the interest of Dan Etete: 30 per cent or 6 million ordinary shares and Hassan Hindu, wife of the Wakili Adamawa, Alhaji Hassan Adamu: 20 per cent or 4 million ordinary shares.
However, with Abacha’s death and the emergence in 1999 of a “Pharaoh that knew not Joseph”, to borrow a Biblical expression,
When Professor Anya Oko Anya said the foregoing in 2002, he could not have imagined that in another 15 years, the situation in our country would be far worse than at the time he was quoting the cleric. Like many of the few men in his generation who can boast of making positive contributions to our country without being part of the rot, Prof Anya was always agonising about Nigeria in all the private sessions I have had with him since 1997 when his son, Chidi, and I met at the University of Lagos and became close friends. With that, I the story became interesting in 2000. At a period Olusegun Obasanjo was now President and Atiku Abubakar Vice President, the entire documents for Malabu got missing at the CAC and a new one surfaced: Enter Munamuna Siedougha and Fasawe Oyewole with the shares redistributed as follows: Munamuna Sidougha, 10,000,000 and Pecos Energy Limited, 10,000,000. It was at this point that Mohammed Abacha’s name disappeared from the Malabu manifest and Etete more or less became the sole proprietor.
While I enjoin readers to visit the online edition for the complete version of my 2013 piece, the OPL 245 deal which led to the payment of $1.092 Billion to Malabu was the result of a systemic abuse of discretion in which an oil minister and his late boss, taking powers from military decrees, subtly allocated a fruitful oil block to themselves even though Etete has succeeded in playing a fast one on the Abacha family. But the core question in the Malabu deal lies in the process of awarding oil licenses and leases which is placed at the discretion of the Oil Minister or President. That is the critical issue we must deal with.
If the PIB merely transfers the powers of the Minister in the 1969 Petroleum Act to the President who can now grant licenses outside the bid round, then nothing has changed. The President should not have such transactional powers which he/she could then easily delegate to the minister who acts on his/her behalf anyway. The lesson we must learn from the Malabu scandal is that NO ONE SHOULD HAVE discretionary power to grant oil licenses and leases outside a competitive and transparent bid round.