Nigerian lawmakers to probe state oil firm deals without tenders

Fri May 3, 2013 2:54pm EDT

* Activists say contracts given to firms with no experience

* Say transparent bidding process lacking

* State oil firm denies any wrongdoing

By Tim Cocks

LAGOS, May 3 (Reuters) - Nigerian lawmakers said that next week they will investigate deals in which the state-oil firm gave two local firms with no previous operating experience the rights to make potentially billions of dollars from oilfields without competitive bidding.

Local activists raised the issue with the parliament last week, while Nigerian National Petroleum Corporation (NNPC) has denied any wrongdoing.

"We have invited them (the activists) to come and table the matter and substantiate their claims ... We have also invited NNPC to get their side," Senator Emmanuel Paulker, the head of the Senate committee on upstream oil and gas, told Reuters.

The lower house passed a motion late on Thursday to investigate the deals, which activists say cast doubt on pledges by President Goodluck Jonathan's government to improve transparency and end an era of backroom deals that have characterised Africa's biggest energy industry for decades.

Activists say multi-layered deals on oil blocks through secretive local companies, often lacking technical expertise, are at best inefficient and at worst an avenue for corruption.

In 2011, Septa Energy and newly formed Atlantic Energy, owned by tycoon Jide Omokore, signed "strategic partnership agreements" with the Nigerian Petroleum Development Company (NPDC) to help it operate oil mining leases (OMLs) 4, 38, 41, and 30, 34, respectively.

Reuters obtained copies of the deals on Friday.

The chief executive of Atlantic Energy Scott Aitken was previously the head of Seven Energy, which owns Septa. Neither company was immediately available for comment.

"NO NEED FOR BIDDING PROCESS"

Activists from a region of the Niger Delta, where the blocks run by Atlantic Energy are located, allege the deals breach rules requiring the government to openly tender for stakes in oil blocks. They also accuse Oil Minister Diezani Alison-Madueke of having an indirect financial interest in Atlantic, which was denied by the state oil firm that she heads.

"The protesters complained of the secret and arbitrary farm-out of (the blocks) ... to both Atlantic Energy Drilling Concept and Septa Energy Limited without regard to the law and due process," Afam Ogene, the proposer of the motion, told parliament late on Thursday.

The NNPC, the NPDC's umbrella company, said in an emailed statement there was legally no requirement to tender the deals.

"There was never any sale of equity involved ... As such, there is no need for a bidding process," it said.

"There is no evidence indicating that the honourable minister of petroleum resources has any direct or indirect pecuniary interest in the company (Atlantic)," it added.

Former operator Royal Dutch Shell sold its 45 percent stake in the blocks to various bidders, including Heritage Oil and a consortium involving Eland Oil in 2011. At the same time NNPC transferred its 55 percent stake to its production arm NPDC.

NPDC then planned to operate the blocks itself but industry experts say it lacked the capacity or finances to do so.

The agreements struck with Atlantic and Septa were supposed to resolve this, but the companies quickly sub-contracted out the work to other oil operators with relevant experience.

"It is worrisome that the entire racket became possible through a mischievous process of hinging the transaction on the strategic alliance agreement, an action deliberately designed to circumvent due process and transparency," Ogene said.

Copies of the original agreements obtained by Reuters show Atlantic gets 30 percent of oil profits from OML 34 and 30, while SEPTA gets 10 percent of oil profits on OMLs 4, 38 and 41.

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