Investigations into oil block awards begin in Nigeria

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Nigeria’s government is investigating awards of oil exploration blocks made in the last days of the administration of Olusegun Obasanjo, the previous president.

By Matthew Green in Lagos

Umaru Yar’Adua, who took over from Mr Obasanjo 12 months ago, has pledged to reverse declining production from Africa’s biggest oil industry with a set of reforms designed to maximise state revenues and introduce greater transparency.

But the government’s decision to audit the 2007 licensing round – held two weeks before Mr Obasanjo stepped down – is likely to shift attention to allegations of impropriety under the past administration.

Western majors that dominate the energy industry in Nigeria – the world’s eighth biggest oil exporter – largely shunned the auction, leaving it to smaller, little-known companies to purchase only 18 blocks of the 45 on offer.

The sale – which followed earlier licensing rounds in 2005 and 2006 – was perceived in the industry as a last chance for Mr Obasanjo to dispense patronage to key backers before the end of his eight-year tenure. Mr Obasanjo’s supporters say elements in the current administration are intent on discrediting him.

The oil ministry issued a statement on Tuesday saying it had asked Tony Chukwueke, the director of the Department of Petroleum Resources, the industry regulator, to step down pending an in-depth audit of the round. It said the decision was not taken owing to any finding of impropriety on the part of Mr Chukwueke.

The investigation highlights the dilemma Mr Yar’Adua faces in balancing his government’s desire to address allegations of mismanagement under its predecessor with a need to project an image of consistency at a time of heightened uncertainty for the oil industry in Nigeria.

Royal Dutch Shell warned last month that the government risked undermining investor confidence after Mr Yar’Adua demanded Shell and ExxonMobil pay a total of $1.9bn in unpaid taxes and revenues after a government committee reviewed contracts for offshore oilfields signed in 1993.

Nigerian officials play down the concerns, saying they are only trying to ensure the country wins its fair share of revenues, given the surge in oil prices to record highs.

News of the inquiry into last year’s licensing round is also likely to heighten speculation over whether the government may revisit more of the energy deals made under Mr Obasanjo. Nigerian officials are seeking to distance themselves from the kind of agreements Mr Obasanjo pursued with Asian oil companies to swap oil exploration rights for promises of multi-billion dollar infrastructure investments in pipelines or refineries. None of the pledged projects has so far materialised.

Scrutinising the award of oil blocks could prove a fresh source of embarrassment for Mr Obasanjo, already smarting from public scrutiny of his government. An investigation by the National Assembly into his management of the power sector caused an outcry after it revealed evidence of fraud.

The Financial Times

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