Thursday, June 10, 2010

$600m Mobil oil lease done in Nigeria’s interest –presidency

The Federal Government yesterday said the approval of the $600 million renewal fee in respect of oil mining leases (OMLs) for Mobil Producing Nigeria (MPN) in the Niger Delta was done in the interest of Nigeria.

The government settled for the $600million when it became clear that the oil firm was not willing to accept anything in excess of the sum of $600 million and the additional terms imposed by the minister in addition to the reserve/renewal fee.

The oil majors were only paying just $1 million as the renewal application fee before the recent development based on the 1969 Petroleum Act which did not in anyway specify how much the oil companies should pay for renewal of leases.

However, a technical committee headed by the Special Assistant to the President on Energy, Dr. Emmanuel Egbogah had recommended between $600million and $1.8billion for renewal of leases.

The government, the source said, was able to get commitment from the oil company to constructing 500-mega watts, independent power project (IPP) plant which requires an investment by MPN of approximately $900 million. This is apart from the fact that the company is paying the $600million lease fee and also relinquishing one of the leases, OML 69.

The source argued that it was obvious that summing up the agreement the government entered with the oil firm, the gain is worth more than the $1.8billion maximum earlier proposed by the committee.

The details of the agreement which was contained in a memo by Odein Ajumogobia, former Minister of State Petroleum Resources (HMSPR) to the late President Umaru Yar’Adua, listed the implications of attempting to push upward to the $1.800 billion maximum renewal fee proposed by the Emmanuel Egbogah technical committee on the renewal of all the three OMLs 61, 68 and 70 operated by MPN in the country.

Ajumogobia, in the memo which was made available to our correspondent, was quoted as telling the late president that after a protracted impasse between November 2008 and August, 2009, "sometime in August 2009, MPN offered a reserve fee of $75 million for oil mining leases (OMLs) 67, 68 and 70 as their best offer (neither the Petroleum Act nor precedent provide any real guidance as to what fee could be imposed).

The initially indicated reserve fee of $2.55 billion proposed by the minister of petroleum resources to be imposed on MPN was rejected by the HMSPR who proceeded to negotiate a renewal fee based on recommendations contained in a report by a technical committee chaired by Emmanuel Egbogah".

The minister wrote further in the memo "we appear to have reached another impasse. It would appear that the only way to determine whether $600 million does in fact represent the maximum consideration that the Federal Government can extract voluntarily from MPN in respect of the renewal of their leases at this time would be by insisting on the significantly higher payment proposed by the Egbogah committee representing a fee closer to the maximum (in the spectrum of minimum $700 million to maximum $1.8 billion notwithstanding.

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