OBASANJO/EXXONMOBIL BONNY IPP DEAL: FELONY OR FRAUD?

The level of executive callousness in the alleged plundering of billions of dollars by the leadership of the immediate past administration as revealed at the House of Representatives Public Hearing on the Power Sector was very disturbing or rather worrisome.

 Equally disturbing was an allegation that the immediate past president, Chief Olusegun Obasanjo while also doubling as the sole administrator of the nation’s oil ministry single handedly allocated hundreds of millions of barrels of crude oil to ‘potential’ power plant builders under terms that were unfavorable to both the Federal Government and the Nigerian people.

Documents released at the venue of the House Hearing show that Chief Obasanjo in 2004 approved for ExxonMobil to lift 30,000 barrels of the Nigerian crude oil per day for two years in exchange for building the Bonny Independent Power Project in River State. The agreement involved the American oil company producing 350 megawatts of electricity for the National Grid, but on the condition that a back-to-back arrangement to guarantee repayment of the expenditure be made.

 An extract from the Terms of Reference of the Agreement stated that: “To enable Mobil Producing Nigeria Unlimited (MPN) effectively implement the project, MPN requires a suitable Payment Guaranty Agreement (PGA), pursuant to which NEPA’s payment obligations, under a 20-year Power Purchase Agreement to be negotiated and executed between NEPA and MPN (PPA), will be guaranteed.  In furtherance of this PGA, the Nigerian National Petroleum Corporation (NNPC) has indicated its willingness to grant, or cause to be granted to MPN, the right to lift 30,000 barrels per day (TBD) of NNPC’s crude entitlement every month (lifting right) for two (2) years…”

 As at 2000 when the term of reference was first drafted for the ExxonMobil Bonny IPP, the total cost of the project was put at $285 million, but in 2004 when the agreement was revised, it had risen to $635 million.

This was the brief to Obasanjo by Chief Funso Kupolokun, the immediate past Group Managing Director of the NNPC on the astronomical rise in the cost of the project: “NNPC invited ExxonMobil to discuss possibility of resuscitating this project. ExxonMobil posits that, at current fiscal terms, the project would be unviable if executed on a stand-alone basis. They noted that the project location was quite remote from their gas sources. Moreover, it would require development of non-associated gas sources (NAG), as there is no available associated gas (AG) for this purpose. All these have put the cost at about $635 million, which is far higher than the cost of higher-output power plants, and may not be recovered from normal consumer tariffs.”

 There are 730 days in two years. Between 2004 and 2005 crude oil price hovered between $60-$70 Dollars per barrel. Using $60 dollars as conservative average within the period under review, ExxonMobil should have raked-in $1.314 billion in two years to fund the Bonny IPP project as approved by the former president, Chief Obasanjo. Meanwhile, the 2004 revised cost of the project was $635 million up from the $285 million originally agreed in 2000.

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 Interestingly, the contract stated that the Federal Government was supposed to provide 49% of the cost of the power plant as its share capital contribution to the project. When the above figure is juxtaposed on the actual project cost (2004 revised value), the level of fraud or rather fiscal irresponsibility by the past government would become better appreciated.

 In addition to the crude oil allocation, the federal government was supposed to provide a cash backing to NEPA (Now Power Holding Company of Nigeria) worth $145 million, which is to be kept in an account to offset the power purchase bill to ExxonMobil for power to be given to NEPA. Though this was supposed to be a partnership project, the power generated from the IPP is to be sold to NEPA, which would in turn sell to its customers on the National Grid.

 Except the Obasanjo Presidency was wrongly represented on this matter, there are so many issues that need to be addressed. If ExxonMobil was to generate power at its Bonny IPP Project and sell to NEPA (PHCN) for ultimate sale to its customers, why the Federal Government funding in the first instance? And if the project was supposed to be a joint venture partnership between government and the private American oil firm, what was ExxonMobil’s agreed counterpart contribution to the project?

 How come the Obasanjo Presidency agreed to allocate 30, 000 barrels of crude oil per day for two years and also provide a cash backing of $ 145 million when it was very clear that ExxonMobil had no purely gas or associated gas wells or fields anywhere near Bonny except its natural gas liquids facility which gets its feedstock from the company’s facilities offshore and nearshore Ibeno/Eket in Akwa Ibom State? Why was it very difficult for the Obsanjo Presidency to grant some incentives to Shell Petroleum Development Company to achieve integrity of its gas sources and supply facilities to the Alscon Power Plant at Ikot Abasi that has the capacity to supply over 50 percent of the power need of the entire eastern Nigeria, or compel Nigerian Gas Company to negotiate with ExxonMobil on gas feedstock to the Alscon Plant a nearby facility rather than the virgin concept in Bonny Island? The conduct of the leadership of the immediate past administration in the NIPP contracts should rightly be categorized as felony and treated as such because of the severity of the hardship their actions or inaction caused the real Nigerian people.

 Obviously, revelations at the House Committee Hearing had established that Obasanjo single-handedly messed up the NIPP projects. He out rightly squandered the money meant for the project or maybe he did not use the resources for targeted purposes. Whichever way, the only option left now for Nigerians through the National Assembly, civil society, NEITI is to ask Obasanjo and his gang to look for and return the misplaced (misspent) billions of dollars to the national coffer. President Yar’Adua in his funny way established that Obasanjo wasted $10billion (by his own accounting) on the power sector, should he not have gone ahead to constitute a judicial commission of inquiry? Maybe, he can still claim he is waiting for the report of the House Committee to decide what to do. Whatever he is doing, Nigerians are watching.

BY: IFEANYI IZEZE
 IFEANYI IZEZE is an Abuja-based Enabling Environment Consultant
(iizeze@yahoo.com)