Atlantic Energy & Seven Energy's transactions with NPDC Illegal - CBN


Wednesday, February 05, 2014 09.36 AM / News

At the National Assembly yesterday, the Governor of Nigeria’s Central Bank (CBN) Sanusi Lamido Sanusi told the Senator Ahmed Makarfi led committee on Finance raised fresh allegations against the management of transactions constituting part of the unaccounted for $20bn oil proceeds and called the transfer of proceeds to Atlantic Energy and Seven Energy as unconstitutional and Illegal.


The CBN Governor speaking ex tempore (albeit from his written submissions) stated that from findings


“….the NNPC took over oil wells left by Shell and handed over same to NPDC who took over and handed over to two (2) Nigerian companies - Atlantic Energy and Seven Energy; and transferred revenue that should come to the Federation Account to these companies


He went further “I have given three (3) separate legal opinions to this committee on the unconstitutionality and illegality of this transactions”.


In essence, it would appear that from the disclosure that there is a non-remittance of six billion dollars ($6bn) of gross crude revenue that ought to be remitted to the Federation account by NPDC as part of the divested assets.


Recall that long before the issue of non-remittance occurred, Jide Omokore’s Atlantic Energy had explained its relationship with NPDc as that of a “provider of an alternative funding agreement in order to meet the Nigerian Petroleum Development Company Limited’s cash call obligations in the affected OMLs”.


It is instructive that when NEITI was asked to present its audit of the oil industry/NNPC, its representative stated unequivocally that the audit has just commenced and would take up to nine (9) months to complete.


The Committee Chairman adjourned the sitting to Thursday, February 13, 2014 where further details on this development would hopefully be addressed. In the meantime, all parties involved have been requested to make relevant submissions to the Senate Committee by February 07, 2014.


Explanatory Notes on Transactioon Put forth by Atlantic Energy on Tuesday, May 14, 2013:

'Atlantic Energy Drilling Concept Nigeria Limited is a member of the Energy Resources Group, owned by Chief Jide Omokore, who is also its chairman.  Other companies in the Group include Global Tides Energy Services Limited, SPOG Petrochemicals Nigeria Limited and Innovative Haulage Limited. Chief Omokore is an accomplished entrepreneur committed to the socio-economic development of Nigeria. A man of uncommon zeal and passion for his calling on entrepreneurship, he owes and oversees a vast business empire with substantial investment in many key sectors of the economy, including upstream and downstream oil and gas industry, estate and property development, and aviation, among others’.


'Transfer of Shell shares: The Facts of the Matter

The issue of operatorship of the oil blocks in which Shell relinquished its stake is perhaps the most explained issue in the Nigerian oil industry in recent times. But during the protest by the communities at the National Assembly, they alleged that the minister had secretly transferred production rights in four large oil blocks (OMLs 26, 30, 34, and 42) to Atlantic Energy Drilling Concept Limited. In their petition, the communities alleged that there was “deliberate exclusion of indigenous rights to preemption and/ or first refusal and breach of open and competitive bidding on the four oil blocks.”They demanded an outright cancellation of “the on-going hand-over of OML 4, 26, 30, 34, 38, 41 and 42 to Atlantic Energy and Septa Energy” and that the deal “be put on hold pending the determination of the issues raised in the petition.”


The alleged transfer of the production rights four OMLs to Atlantic Energy, which seems to be the basic assumption for the entire group’s other allegations, is flawed. The petitioners also alleged that “by such transfer, 60% ownership of Nigerian Petroleum Development Company’s 55% equity interest in the affected OMLs are transferred to Atlantic Energy Drilling Concept”.But as the Petroleum Minister did over a year ago, the NNPC has cleared the obvious misunderstanding on the issue in response to the Senate, which is investigating the claims. The OMLs have not been transferred to Atlantic Energy. NPDC produces the OMLs in which companies, other than Atlantic Energy, own stakes, having taken over from Shell.


The role of Atlantic Energy in the divestment issue is just the provision of funding, which both NNPC and NPDC have explained. According to the NNPC: “The Strategic Alliance Agreement entered into between Nigerian Petroleum Development Company Limited and Atlantic Energy Drilling Concept Limited was not a divestment of Assets nor transfer of Operatorship but simply an alternative funding agreement in order to meet the Nigerian Petroleum Development Company Limited’s cash call obligations in the affected OMLs.“Unlike the divestment of the private equity owners’ (The Shell Petroleum Development Company Limited, Total E&P Nigeria Limited and Nigerian Agip Oil Company Limited equity interest to ND Western Nigeria Limited and Shoreline Nigeria Limited) in which the entire 45% equity interest in the affected OMLs were divested, the Strategic Alliance Agreement simply creates an obligation for Atlantic Energy Drilling Concept Limited to provide funding for the development of these assets as opposed to acquisition of equity interest in the block.


“It is instructive to note that the Nigerian Petroleum Development Company Limited is the Operator and still owns its 55% interest in OMLs. The Company has not divested any of its interest in the OMLs as erroneously alleged by the Petitioners. This can be easily discerned from the Strategic Alliance Agreement attached to the petition”.


And the NPDC explained: “The fact of the matter is that Atlantic Energy Drilling Company was never assigned such equity. The 55% equity interest in those blocks were assigned to NPDC, which is our National Oil Company and is an exploration and production (E&P) subsidiary of NNPC.“In line with the governing provision regulating divestment or transfer of participatory interest in any oil block, the Honorable Minister after due consideration, approved the assignment of NNPC’s interest to NPDC.


“Needless to say, the Honorable Minister’s action is within the scope of her statutory oversight responsibility and in essence for the greater benefit of the nation. We must also point out that NPDC, as a subsidiary of NNPC, is as indigenous as any community can claim to be and represents a much wider scope of indigenous rights than the Delta State Oil Producing Communities”.


On the issue of the Strategic Alliance Agreement, the NNPC pointed out that there was never a breach of due process. The Corporation said the agreement neither violated the public procurement act nor oil industry guidelines.


“We are very mindful of the objectives of the Bureau for Public Procurement and the scope of application of the Public Procurement Act and we wish to state that the Strategic Alliance Agreement entered into with the Atlantic Energy Drilling Concept Limited does not fall within the purview of the Public Procurement Act. The Nigerian Petroleum Development Company Limited is by the Strategic Alliance Agreement receiving funds from Atlantic Energy Drilling Concept Limited to finance its 55% equity interest in the affected OMLs and not the procurement of goods, works or services as contemplated under the Public Procurement Act. Therefore, it is absurd to suggest that the Strategic Alliance Agreement is in contravention of the Procurement Act,” NNPC stated.

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