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Senegal’s brewing oil and gas controversy reinforces need for Nigeria’s PIGB

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Cayar Offshore Profond and St. Louis Profond, two oil blocks in Senegal have caused controversy since 2012, when a previously unknown company called Petro-Tim was unexpectedly awarded the licence despite having no known track record in the industry.

Soon after, Aliou Sall, the president’s brother was hired at the company. Protests against the deal erupted in the capital Dakar in 2016 during President Macky Sall’s first term.

Now, a June 4 British Broadcasting Corporation’s report has awakened the ghost of this natural resource mismanagement controversy, which Nigeria’s Petroleum Industry Governance Bill (PIGB) was designed to limit by promoting transparency and accountability in oil licensing.

According to the BBC investigation, the award of the licenses to Petro-Tim and the transfer same to Timis Corporation and subsequent events exhibited at least three red flags, common in Nigeria too.

Unqualified company: Petro-Tim had no exploration experience and was incorporated up a few weeks after the contract was signed, according to the investigation.

Company payments to a politically exposed person: Timis Corporation employed the president’s brother and paid him $25,000 per month.

The BBC also reported a secretive payment from Timis Corporation to an offshore company owned by the president’s brother, though the company and the brother deny the payment ever existed. The BBC alleged that Timis in 2014 secretly paid $250,000 to a company run by Aliou Sall called Agritrans, based on a trove of documents it reviewed.

It said Timis also paid Aliou Sall $1.5 million in salary over five years for his work in Petro-Tim, the company that was originally given the blocks before Timis Corporation, and that he was also offered $3 million in shares in Timis companies.

Asset flipping: the winning company, Timis Corporation, sold the block for a large profit having made limited contributions towards its development. The Senegal situation is not the most dramatic or disturbing example of these challenges. In Nigeria, in the late 1990s, the petroleum minister allocated the oil block OPL 245 to a company called Malabu which he himself partly owned.

Shell and Eni later sought to acquire the rights to the block. But what to do about Malabu? In 2011, Shell and Eni paid $1.3 billion into a Nigerian government account for the block. Multiple accounts conclude that more than $1 billion of the payment ended up paying off Malabu’s owners, government officials, and other private parties.

Leaked emails indicate that Shell and Eni personnel negotiated directly with Malabu’s owners to arrive at the deal. Again, weak company due diligence was not the problem as OPL 245’s history was well known to all parties. Rather, the companies knew the risks and chose to engage with Malabu anyway.

Weak institutional frameworks for natural resource governance have been blamed for these lapses. To correct this, Nigeria embarked on a comprehensive oil sector reform, which has stalled with the PIGB failing to receive presidential assent.

Unlike the position under the current Petroleum Act, P10, LFN 2004 which confers discretionary powers on the Minister to grant, renew extend or revoke petroleum exploration and production licences and leases, the Governance Bill gives the power to exercise those functions, in the Nigeria Petroleum Regulatory Commission (the “Petroleum Regulatory Commission” or the “Commission”).

The Bill also transfers the power to grant licences in relation to refineries and such other downstream activities as the importation, sale, storage or distribution of petroleum products, and price control of petroleum products from the Minister to the Petroleum Regulatory Commission.

However, on August 29 2018, President Muhammadu Buhari declined assent to the Bill after it had sailed through both Houses of the National Assembly citing constitutional and legal reasons and the proposed law’s tendency to whittle down the power of the Minister of Petroleum Resources and vest the same in some technocrats.

As of May 2019, both houses of the National Assembly had passed a re-drafted version of the Petroleum Industry and Governance Bill, addressing all the objections raised by the presidency. There has not been any response from the Presidency yet.