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N9 trillion contract scandal rocks NNPC

Thursday, 5 October 2017

President Muhammadu Buhari is yet to clear the air about the allegations of a tune of N9 trillion naira at the Nigerian National Petroleum Corporation ( NNPC ), more than 24 hours after leakage of an internal memo which detailed the allegation.

Presidential spokespersons, Femi Adesina and Garba Shehu, did not pick or return calls, or respond to text messages on the matter despite concerns expressed by Nigerians and activists.

The Minister of State for Petroleum Resources, Ibe Kachikwu, detailed the questionable deals when he alerted the president to the activities of the Group Managing Director of NNPC, Maikanti Baru.

In the August 30 correspondence, Mr. Kachikwu said Mr. Baru circumvented extant procurement regulations in awarding a series of contracts up to $25 billion —or N9 trillion at prevailing exchange rate of N360 to a dollar— warning of grave consequences the decisions could wreak if allowed to stand.

The letter appeared on the Internet around noon Tuesday, but no one has claimed credits for its leakage.

Mr. Kachikwu gave a breakdown of the contracts said to have been awarded without recourse to the Ministry of Petroleum or the management board of the NNPC; including $10 billion crude term contracts; $5 billion direct sales direct purchase (DSDP) contracts and $3 billion AKK pipeline contract.

He also said a $3 billion was awarded as a contract for various financing allocation funding contract and another $3-4 billion NPDC production service contracts.

CRUDE TERM CONTRACT

The crude term is the annual contract which the Nigerian government enters with firms willing to do lift crude oil in the country through competitive bidding.

About 39 companies won the contract for the 2017-2018 bids, out of 224 bids submitted, according to the NNPC.

The winners included 18 Nigerian companies, 11 international traders, five foreign refineries, three national oil companies (NOCs) and two NNPC subsidiaries.

All the contracts are for 32,000 barrels per day except Duke Oil Ltd, an oil trading arm of the NNPC, which secured 90,000 barrels per day.

The Senate on Wednesday, however, resolved to investigate the allocation to Duke Oil, after a senator alleged it was fraudulently done.

AKK CONTRACT

The AKK contract pipelines contract was awarded by Mr. Baru for the installation of the new Ajaokuta-Kaduna-Kano gas pipelines. Estimates for the contract ranged from $2.3-2.7 billion.

The NNPC announced in May that a Chinese firm won the contract to complete 80 per cent of the project on public-private partnership basis. Mr. Baru was also reported to have confirmed receipt of $250 million from Chinese banks for the take-off of the project.

Some Nigerian senators raised concerns about the contract shortly after it was awarded, but the Senate resolved not to take action until there is enough evidence of wrongdoing.

DSDP CONTRACT

The Direct-Sale–Direct-Purchase was adopted by the Buhari administration last year to replace the crude oil swap initiative and the offshore processing arrangement.

The policy, which was designed by Mr. Kachikwu when he was still the GMD of NNPC, was aimed at entrenching transparency in the crude oil for product transaction by the NNPC.

Under the crude oil swap initiative, crude oil was exchanged for petroleum products through third-party traders at a pre-determined yield pattern.

Mr. Kachikwu said the DSDP option eliminates all the cost elements of middlemen and gives the NNPC the latitude to take control of sale and purchase of the crude oil transaction with its partners.

NPDC PRODUCTION SERVICE CONTRACTS

The Nigerian Petroleum Development Company is a subsidiary of the NNPC that majors in the production of crude oil. The firm is responsible for the control of oil wells owned and managed by the NNPC.

The production service contracts are contracts awarded for production of crude oil from oil fields run by the NPDC.

The NPDC, due to its operational and capacity deficiencies, regularly enters production contracts with other oil companies — especially oil majors like Agip and Shell— to lift crude based on quantities determined in their contract.

The minister said Mr. Baru shunned procedural requirements which stipulated that any contract award over $20 million must be reviewed and approved by the NNPC board to be valid.

Source: ( Premium Times )

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via: INFORMATION NIGERIA

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