Nigeria Moves To Recover $3 Billion From Chinese Owned Addax Petroleum
Nigeria has commenced legal proceedings against Chinese owned oil firm, Addax Petroleum, for recovery of the sum of $3 billion alleged to be under-remitted royalties, and taxes by the company.
In the documents filed before Justice Olatoregun on Friday, Nigerian governments said the funds are outstanding claims against the company under the Petroleum Profit Tax Act and Petroleum (Drilling and Production) Amendment Regulation 2003 over Oil Mining Leases (OMLs) 123, 124, 126, and 137.
Joined as respondents in the suit are Addax Petroleum Development Nigeria Ltd, Addax Petroleum Exploration Nigeria Ltd, the Nigerian National Petroleum Corporation (NNPC), the Ministry of Petroleum Resources/Department of Petroleum Resources, and the National Petroleum Investment & Management Services (NAPIMS).
Documents filed before the court by D.A. Awosika and partners, the chamber representing the Federal government in the suit indicated that the company piled up the $3 billion unremitted funds as a result of its illegal and irregular reliance on Side Letters dated 21st November 2001, 20th December 2001, and 24th August 2004 which were never gazetted.
The move to recover the funds from Addax came three months after a PREMIUM TIMES report on how the Chinese firm allegedly paid millions of dollars in bribes to Nigerian officials to secure juicy contracts in the oil industry.
In 1998, Addax Petroleum, a subsidiary of China’s Sinopec Group, one of the world’s largest oil and gas producers, entered into a Production Sharing Contract (PSC) with the NNPC (as concessionaire) in respect of OPL 98/118 and OPL 90/225.
Four years later, the company discovered oil in commercial quantities and the OPLs were converted into Oil Mining Leases (OMLs) 123/124 and 126/137.
The PSC entered by the two parties required Addax Petroleum to pay royalties on any oil produced from the relevant oil blocks at the rate of 20 percent as stipulated by law. It also provided that the Petroleum Profit Tax Act (PPTA) applicable to the contract areas shall be 65.75 percent for the first five years, starting from the first day of the month of the first sale of the oil, and 85 percent thereafter.
But, according to the Statement of Claim filed by D.A Awosika & Partners, Addax Petroleum fraudulently obtained a Side Letter in 2001 and 2004 which were “never gazetted” and which they used in calculating their taxes and royalties.
The calculations in the side letters fixed the PPT payable by the company at 60 percent and, rather than the 20 percent flat rate of royalty, provided for a graduated rate depending on the volume of oil produced from the oil blocks.
The side letters were signed by Enginneer Funsho Kupolokun, then Special Assistant on Petroleum and Energy to former President Olusegun Obasanjo (in 2001) and Olabode Agusto, then Director General/Special Adviser on Budget to the President (in 2004).
“Several objections and protests were raised by FIRS (Federal Inland Revenue Service), NNPC, and DPR to the reliance on these side letters by the Defendants to bypass, supplant, and subvert the process,” the government’s lawyers stated in their claim.
“In 2003, in order to give effect to the graduated royalty regime stated in the side letters, the Minister of Petroleum Resources (Mr. Obasanjo) issued the Petroleum (Drilling and Production) Amendment Regulations which provided for graduated royalty rates for onshore and shallow offshore PSC which did not account for royalty by tranches.
“The Petroleum (Drilling and Production) Amendment Regulations 2003 when made was given retrospective effect from the first day of January, 2000, which was the same date of commencement of the graduated royalty rates contained in the side letters.”
Several meetings between Nigerian government officials – represented by the FIRS, DPR, and NNPC – and representatives of Addax Petroleum reassess
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