Nigeria will lose at least N549 billion ($2.8 billion) in oil royalty and petroleum tax if what appears a shady and absurd deal the Attorney General of the Federation and Minister of Justice, Mohammed Adoke, is negotiating with the Nigerian subsidiary of Chinese-owned Addax Petroleum, sails through, a joint investigation by PREMIUM TIMES and THE WILL has revealed.

This new shocking deal is reminiscent of the infamous Malabu Oil scandal in which the Attorney General was also named. It is not clear whether he is engaged in this new deal for pecuniary reasons.

We learnt that Mr. Adoke is working to reach an out-of-court settlement in a law suit over a 15-year alleged miscalculation of oil royalty obligations and taxes worth $1.7billion and at least $1 billion respectively between Addax (plaintiff) on one side and the Nigerian National Petroleum Corporation, NNPC, Ministry of Petroleum Resources (Department of Petroleum Resources, DPR), Federal Inland Revenue Service (FIRS) and the Attorney General of the Federation (defendants) on the other.

Addax had approached a Federal High Court in Abuja in 2014 to stop the payment of the disputed unpaid royalty stemming from its alleged miscalculation of oil royalty requested by the DPR.

The company is also challenging the NNPC for over-lifting crude from its Production Sharing Contract (PSC) of OMLs 123, 124, 126 and 137 to cover for the alleged miscalculation.

A source with extensive knowledge of the matter told our reporters that Mr. Adoke is putting pressure on lawyers and other officials working on the case to discontinue the law suit for a negotiated settlement that is unfavourable to the interest of the country and may cost the government an hefty N549billion.

According to our sources, lawyers working on the case, who are confident that the government has a good case and should follow through with the suit, are now distraught by the deliberate attempt by Mr. Adoke, who interestingly did not send any legal representation despite being named a defendant in the suit, to tank their hard work.

“Adoke did not make a representation, did not file his submission; did not show any interest in the case whatsoever,” one of our sources said. “The only time he showed interest was when the Federal Government asked for his opinion as the chief law officer of the government.”

There seems to be a rush to tidy this deal before the elections. Pressures are on the lawyers to seat on the table and knock out this deal with Addax,” another source added.

In fact, we learnt the NNPC has already directed its lawyers to discontinue further challenge of the suit and comply with “the dubious out of court settlement”.

The intrigue involved in the case is also deepened by the fact that Addax is represented by a former Minister of Labour, Adetokunbo Kayode, who briefly held the office of the AGF before the appointment of Mr. Adoke to the position.

“Adoke has a history of advising government in a way that make our country to lose money,” one of our sources said.

What our source was referring to was the role Mr Adoke played in authorising the transfer of $801 million to the account of Malabu Oil and Gas owned by convicted felon, Dan Etete, in the infamous Malabu scandal.

An extensive PREMIUM TIMES investigation had revealed that as at the time of ordering the transfer of the money to Malabu, which at the time was an illegal organisation as it was registered using a fictitious character and had submitted a fake address to the Corporate Affairs Commission (CAC).

If this new deal sails through, it would the second time in four years Mr. Adoke has presided over shady oil deals that have cost the Nigerian people several millions of dollars that would have come in handy in the face of tumbling oil prices that is the mainstay of the country’s economy.

Mr Adoke could not be reached for comments.

His mobile telephones were switched off when PREMIUM TIMES tried to reach him.

Questions were then sent to the spokesperson of the Ministry of Justice, Charles Nwodo, via email and text message. Mr Nwodo said our enquiry was passed to the appropriate quarters but no response came from the ministry for days.

The Side letter

The issue that culminated in the legal stand-off between Addax and the Nigerian authorities was triggered 14 years ago during the regime of the then President Olusegun Obasanjo.

In 2001, Mr Obasanjo, who was also his administration’s Minister of Petroleum, granted Addax a fiscal incentive of graduated rate of royalty based on the volume of crude oil produced from OMLs 123, 124, 126, 137, as opposed to the 20 per cent flat rate paid by the previous owners of the oil titles, Ashland Oil Company.

The details of the graduated payment is contained in a letter, referred to as a “side letter” dated December 20, 2011 and signed by Funso Kupolokun, Special Assistant on Petroleum to Mr. Obasanjo.

According to the letter, Addax was required to pay graduated percentage of royalty based on the amount of its daily production of oil from the oil titles.

Being the only company that enjoyed such a graduated rate, the DPR in 2003 decided to amend the Petroleum Regulations to provide a level-playing field to all exploration companies. However the royalty rate in the side letter and the amended Petroleum Regulation remained the same.

But instead of paying royalty based on its daily production as stipulated in the side letter and later in the amended Petroleum Regulation, Addax calculated its royalty obligations in tranches citing a heading in the side letter that reads: “Production in tranches as recommended by IC”.

By calculating its royalty obligations in tranches instead of using the daily production ration spelt out by the side letter and the Petroleum regulation, Addax drastically reduced the amount of royalty due to Federal Government.

Based on the alleged miscalculation, the NNPC computed the outstanding royalty payment and pretroleum tax due to government as $2.8 billion.

However, according to court documents seen by PREMIUM TIMES and THE WILL, Addax claimed that the NNPC has consistently violated the PSC. It argued that the NNPC engages in “arbitrary and unilateral” over lifting of crude to the tune of $390 million.

It also claimed that it has invested over $3 billion in the contract area, paid over $5 billion in taxes and has improved production from 10,000 barrels per day to 80,000 barrels per day. It said the overlifting of crude by the NNPC is injurious to its business and was creating liquidity challenges.

When contacted, Addax petroleum said it is unable to comment on the issue as it is a subject of litigation.

“Rest assured that Addax is a responsible corporate organization which upholds high ethical standards and carries out its business in line with the laws of its host countries,” said Dorothy Atake, a spokesperson for the company.

Ohi Alegbe, spokesperson for the NNPC, promised to crosscheck details of the case in question and get back to us. He is yet to revert to us as at the time of publishing this report.

Legal precedence

Meanwhile, lawyers representing the government said it was wrong and absurd for Mr. Adoke to be talking of a negotiated out-of-court settlement after all parties in the suit, except the AGF, have made their submissions, and just as the court was about to make pronouncement on the matter.

Feeling confidence that they have a good case even if the case goes all the way to the Supreme Court, the lawyers believe Mr. Adoke’s handling of the matter would create a precedence for similar disputes in future.

“In law they will tell you precedence matters. A deal like this would happen tomorrow and we would find ourselves in a scenario like this and someone would cite this case,” one of our sources said.

credit link:  http://www.premiumtimesng.com/news