The attorney-general of the federation and minister for justice, Mohammed Adoke (SAN), is at the centre of an out-of-court negotiation that may deny Nigeria as much as $2.8bn (about N549bn) of oil royalty and petroleum tax being owed by a Nigerian subsidiary of Chinese-owned Addax Petroleum.
Adoke, according to sources, is working to reach an
out-of-court settlement in a lawsuit concerning a 15-year-long alleged miscalculation of oil royalty obligations and taxes worth $1.7billion and at least $1 billion respectively between Addax (plaintiff) on the one hand 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.
Lawyers representing the federal authorities in the matter said they had been working very hard to retrieve the N549bn from the oil and gas company without any input from the office of the attorney-general.
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, as requested by the Department of Petroleum Resources.
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.
Lawyers in the suit said it was odd for Adoke to suddenly come into the case to talk about reaching an out-of-court settlement.
It was gathered that the AGF had been exerting undue pressure on lawyers and other officials working on the case to discontinue the lawsuit for a negotiated out-of-court settlement.
Lawyers said they are working on the case file and are sure that the government has a good case.
Adoke’s office, which should be the prime mover of this case, did not send any legal representation despite being named a defendant in the suit.
“Adoke did not make a representation, did not file his submission, did not show any interest in the case whatsoever,” a source said. “The only time he (Adoke) showed interest was when the federal government asked for his opinion as the chief law officer of the government.”
Another source confided in the investigators that there seems to be a rush to tidy this deal before the elections.
It was also learnt that the NNPC had already directed its lawyers to discontinue further challenge of the suit and comply with the out-of-court settlement.
The lawyers said it was absurd for the attorney-general and minister of justice to be talking of a negotiated out-of-court settlement after all parties in the suit, except the AGF, had made their submissions, and just as the court was about to make pronouncement on the matter.
Confident that they have a good case even if the case goes all the way to the Supreme Court, the lawyers believe Adoke’s handling of the matter would create a precedence for similar disputes in future.
“In law they will tell you (that) 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.
“Adoke has a history of advising government in a way that makes our country to lose money,” another source said.
Addax was granted 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 in 2011 by the federal government under President Olusegun Obasanjo.
The details of the graduated payment term, contained in a letter dated December 20, 2011 and signed by Funso Kupolokun, special assistant on petroleum to Obasanjo, required Addax to pay graduated percentage of royalty based on the amount of its daily production from the oil titles.
Rather than 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 petroleum tax due to government as $2.8 billion.
Addax is represented in the case by a former minister of labour, Adetokunbo Kayode, who briefly held the office of the attorney-general and minister of justice before Adoke’s appointment in 2010.
Addax claimed in court that the NNPC had consistently violated the PSC, accusing it engaging in “arbitrary and unilateral” over-lifting of crude to the tune of $390 million.
The firm also claimed that it had invested over $3 billion in the contract area, paid over $5 billion in taxes and had improved production from 10,000 barrels per day to 80,000 barrels per day.
It said the over-lifting of crude by the NNPC is injurious to its business and was creating liquidity challenges.
“Rest assured that Addax is a responsible corporate organisation which upholds high ethical standards and carries out its business in line with the laws of its host countries,” Dorothy Atake, a spokesperson for the company said.
The controversial deal being brokered by the justice minister has the trappings of the notorious Malabo Oil scandal in which $801 million was authorised to be transferred to the account of the oil and gas firm owned by the former minister of petroleum resources, Chief Dan Etete.
Ohi Alegbe, group public affairs manager for the NNPC, promised to crosscheck details of the case, but the minister avoided speaking on the issue.
The minister could not be reached for comments last night when LEADERSHIP made effort to reach him through his telephone number.
At about 9.15pm when our correspondent tried to reach him, his telephone line was switched off.
Spokesperson of the Ministry of Justice, Charles Nwodo, did not respond to enquiry posted to him. He said it was passed to the appropriate quarters but no response came.
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