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Published On: Wed, Feb 17th, 2016

Revealed: How Diezani Approves $24bn Crude Swap Without Contract

Deziani Allison-Madueke

Deziani Allison-Madueke

LAGOS FEBRUARY 17TH (URHOBOTODAY)-A former Group Managing Director of the Nigerian National Petroleum Corporation, Mr. Austin Oniwon, confirmed on Tuesday that there was no formal contract between the NNPC and trading companies that lifted $24bn worth of crude oil from the country between 2011 and 2014.
Oniwon told the House of Representatives Ad Hoc Committee on Crude Oil Swap that a former Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, merely granted the “extension” of an earlier contract.
He said the extension was not a formal contract before he (Oniwon) left office in 2012.
The committee is chaired by an All Progressives Congress lawmaker from Kwara State, Mr. Zakari Mohammed.
“There was an approval for the extension by the minister; I believe the records are with the NNPC,” he added.
The NNPC began taking 445,000 barrels of crude daily in 2010 for refining in a bid to meet the country’s local demand of petroleum products.
But when the country’s refineries failed to run, the NNPC resorted to exchanging the crude (swap) for refined products through an arrangement with appointed crude trading firms.
The original (first) contract was signed between the NNPC and two crude traders, Duke Oil and Tranfigura in 2010 to last for one year. It expired officially in 2011.
However, Alison-Madueke reportedly granted an extension of the contract without the NNPC formally signing another contract on the new (second) deal.
The committee had earlier heard from the firms that crude lifting indeed continued till 2014 before a contract was formalised.
One of the lawmakers, Mr. Michael Enyong, said, “These companies had lifted crude worth $24bn before the contract was signed in 2014 and backdated to look like it was signed in 2011 when the first one expired.”
The committee had put Oniwon under pressure after he consistently told members that there was no “breach” in the exchange arrangements throughout his tenure.
When he was reminded that there were evidence indicating that the contract expired in 2011, but it continued to run till 2014, Oniwon replied that Alison-Madueke “approved” the extension.
Oniwon also argued that as GMD of the NNPC, he did not require a presidential and Federal Executive Council approval to enter into the swap arrangements.According to Oniwon, the 445,000 barrels of crude were the property of the NNPC, which it bought from the Federal Government at the prevailing rate for refining.He added that the swap crude was different from the Federation Crude, the latter being entirely the property of the government.Besides, he stated that only 150,000 barrels out of the 445,000 were traded under the swap deals.He added, “I am not a lawyer, but I didn’t need anybody’s approval to take crude to the refinery for refining if the refineries were running.“This crude had been paid for by the NNPC. If I needed to take the crude for exchange, I am not going to write the Federal Government. It is NNPC’s decision on what to do to guarantee regular supply of products in the country.“That was the whole essence of the swap arrangement; to ensure that we had adequate products, which we achieved successfully.”
However, the committee insisted that the NNPC under Oniwon and the former minister breached procurement procedures by engaging in a transaction worth well above N100m without FEC’s approval.
Oniwon stood his grounds that he did not feel the NNPC required another approval, since the minister, “the immediate boss”, had approved the crude swap arrangement.
“If there was supposed to be a higher approval, it was the minister who should seek the approval, not the NNPC,” Oniwon added.
When asked what was the spending or approval limit of the GMD, Oniwon replied, “It was put at $10m.”
Oniwon’s successor, Mr. Andrew Yakubu, also appeared before the committee to say that he made efforts to review the swap arrangement with a view to correcting noticeable lapses, but that he was frustrated.
Yakubu, who assumed office as GMD on June 27, 2012, disclosed that he set up a team of experts from the legal and corporate divisions of the NNPC to carry out the review after which he sent a report to Alison-Madueke.
He added, “Among the issues we raised were the controversies generated by the swap arrangement, the need for contract valuation and how to improve on it to be more beneficial to our operations.
“I forwarded a report to the minister in April 2014 and the document never came to me until my removal (as GMD) was announced by 9pm on August 1, 2014.”
Yakubu advised the National Assembly to give more protection to the headship of the NNPC as a national oil company so that it could perform optimally at all times.
He noted that the current set-up, whereby the GMD’s tenure was left to the pleasure of the appointing authorities, called for an urgent review.
The committee directed the NNPC to search its records and produce Yakubu’s report.
Members also asked the corporation to produce evidence of the extension of the contract Alison-Madueke granted without a formal contract.

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