DPR’s Revocation Of Four Oil Mining License Did Not Follow Due Process-Investigation

The decision of President Muhammadu Buhari to upturn the revocation made by the Department of Petroleum Resources on four oil blocks has saved the country from diplomatic disputes with the government of China.

The Department of Petroleum Resources, had on April 7 revoked the four Oil Mining Licences belonging to Addax Petroleum due to the non-development of the assets by the petroleum company.

The Director/Chief Executive Officer, DPR, Mr. Sarki Auwalu, had told journalists in Lagos that it was discovered that over 50 per cent of the assets had remained underdeveloped.

He said the non-development of the assets had led to the loss of revenue by the Federal Government

But on Friday, Buhari reversed the revocation and gave approval for the restoration of the leases on the four Oil Mining Licences to the Nigerian National Petroleum Corporation.

The oil licences affected are OMLs 123, 124, 126 and 137.

In a statement issued on Friday by the Senior Special Assistant to the President on Media and Publicity, Garba Shehu, the President directed the DPR to retract the letter of revocation of the leases.

He also directed the NNPC to utilise the contractual provisions to resolve issues in line with the extant provisions of the Production Sharing Contract arrangement between NNPC and Addax.

Investigations by THE WHISTLER revealed that the revocation action if it was left to stand would have resulted into several legal implications to the NNPC and the Federal Government.

For instance, it was gathered that the ability of NNPC and the newly appointed Contractor Parties to properly utilize the assets may be severely hampered if Addax goes ahead with its threat to legally challenge the revocation process as regards compliance with Paragraphs 26, 27, 28, 29 and 30 of the First schedule of the Petroleum Act.

Findings by THE WHISTLER further revealed that even if Addax does not contest the legality of the revocation process, they may still have grounds to make claims in respect of cost recovery of outstanding expenditure or consequential losses such as profit against NNPC and thus indirectly the Government.

Investigations further revealed that if the President had not intervened, the revocation would have affected the diplomatic relationship between Nigeria and China.

This is because China which is the parent Country of Addax is the largest trading partner of Nigeria, representing over 20 per cent of international trade and almost three times the next largest trading partner.

In addition, China has also provided financing for key infrastructural projects like the railways, Abuja -Kaduna -Kano Pipeline amongst others.

The revocation action could also threaten the realisation of these critical projects

A senior government official with knowledge of the transaction confided in this Website that the intervention of the President is expected to boost the NNPC’s organisation’s portfolio, thereby making the Corporation to, in the long run, boost its crude oil production and in turn increase the revenue it generates to the Federation Account.

The official said, “The reversal will ensure sanctity of contracts, encourage investments as the investors have more confidence that their investments will be preserved in a country where the rule of law is preserved.

“The second point is that this government has put on hold undue use of discretion especially in the management of hydrocarbon reserves. This is in line with the transparency principles of the Extractive Industries Transparency Initiative. And one of the thing this government seeks to do is that all those discretionary allocation are prevented.

“But this is a situation whereby assets belonging to the federation, the collective wealth of the federation is now being appropriated to private individuals without due process and it is important to point it out that even ordinary marginal Fields is being subjected to bidding let alone oil producing assets that people have invested.

“The third angle is from procedural perspective that these are Production Sharing Contract Assets that belong to the federation and kept in trust by the NNPC. And therefore the licensor is the NNPC and it is also the concessionaire.

“So the revocation that took place was done without any adherence or consultation with the concessionaire. So NNPC only got to read about it in the Newspapers.

“The decision of Buhari must be commended particularly when you consider that this is something that has international dimension. The Chinese Company said they will use governmental, diplomatic and legal basis to challenge the decision.”