NUPRC Accused of Favouritism in Marginal Field License Dispute - Africa’s premier report on the oil, gas and energy landscape.

NUPRC Accused of Favouritism in Marginal Field License Dispute

By Lukman Abolade, Senior Correspondent

Nigeria’s Upstream Regulatory Commission (NUPRC) has been accused of favouritism and undue interference in the allocation of a license to exploit the Ekpat Marginal Field, located in Oil Mining Lease (OML) 67 to MultiPlan Nigeria Limited after initially awarding the bid to another company, Magnumflo Nigeria Limited.

The dispute originated from the controversial 2020 bid round for Marginal fields. During this bid round, Magnumflo Resources, led by Executive Director Robert Bakre, submitted a bid for EKPAT OML 67. Initially, the Department of Petroleum Resources (DPR), now defunct, awarded Magnumflo and another company, Duport Midstream, shares of 57.11% and 48.89% respectively, for the Ekpat marginal field.

Unable to raise the expected signature bonus, Bakre told Africa Oil+Gas Report that he secured an investment agreement with Igho Okotete, the Managing Director of MultiPlan, after failing with investors outside of Nigeria.

A copy of the agreement seen by Africa Oil+Gas Report, Magnumflo agreed to allocate 60% of its 57.11% equity in OML 67 to MultiPlan before the ₦3.9Billion signature bonus was paid to the Central Bank of Nigeria (CBN) on its behalf.

The Memorandum of Agreement (MOA) emphasized collaborative development enshrined in a Joint Operating Agreement (JOA) to be signed after the payment to define roles, responsibilities, and mode of governance but it was never signed by MultiPlan.

Bakre said after MultiPlan had paid the signature bonus, a company based in Switzerland where he had sought funding from indicated interest to fund the asset to first oil and gas in lieu of but Okotete rejected the offer.

A month after the payment, Bakre approached Okotete to request payment for his share of the expenses incurred in the initial development of the asset, but Okotete refused.

Bakre explained, “It was the issue of financing his stake in terms of recurring expenditure, such as diesel, office expenses, and cost of goods, which amounted to 194Million naira, his portion. We were paying out of pocket. That’s where the argument started. He said No, and that’s where the argument started.

“He called us to his office one time, said the amount was too high. Could we negotiate instead? He suggested paying ₦100Million now and ₦50Million from first oil and gas. He also proposed capping our monthly expenditure. We agreed to everything, but the next day, instead of receiving the payment, I received an email stating that he needed to audit all our expenditure because he didn’t want any artificially generated receipts.”

The insistence of Magnumflo for Multiplan to sign the JOA and the latter’s request to audit the expenditure caused a stalemate between the parties and halted communication.

Multiplan told Africa Oil+Gas Report that the ₦194Million bill presented by the Magnumflo was a case

of extortion. “During the bid round, I bid, they did not award us any bid, although they initially told us that we won, and we did different checks but when they awarded, they did not award our own to us, so they gave to people and we found out that some of the people could not pay. These people (Magnumflo) came to me and said I should pay for them and they would give me 60% equity and I agreed. I paid $9.6Millon converted to naira about ₦4Billion, after paying the money, I went to the US to see my family, by the time I came back, they changed that they spend $550,000 and I should bring 60% of it”.

“Before I knew it, they have written a letter, cancelling the agreement I had with them, so I went to Court for about five months and court issued judgement in my favour that they did not have the right to cancel the agreement. The agreement was that after paying the signature bonus and we would work together but they are fraudulent, but they said they spent $550,000 in less than a month? Is there no due process of funding? I have the 60% of their 57.11%, they cannot do anything without my permission”.

When asked about the sudden intervention of the NUPRC in the commercial dispute between his company and Magnumflo, OKotete said he had written to the Commission because he felt he was being extorted in the name of Federal government.

The situation reached a tipping point when NUPRC, the regulatory body overseeing the oil and gas sector, allegedly interfered in the commercial dispute. Despite Magnumflo’s insistence on resolving the matter through arbitration, NUPRC reportedly favoured Multiplan’s stance, leading to a suspension of an arbitration process set up to resolve issues between the companies.

Magnumflo’s Bakre said: “Unbeknownst to us as at January of 2022, he (Okotete) had already written to NUPRC  he wanted to cease and repudiate the agreement with us because we were trying to extort money from him. By June, a week to the time they’re handing the license, that’s when we got to know about the letter. So NUPRC sat on the letter from January, for six months to June, they didn’t tell us anything, until a week to the day they were supposed to award a license to awardees, we got a letter from them which they call for a meeting that there’s an issue with our license, and that we should come for a meeting.

“When we got there, they said we’re not going to give you a license because this man is saying that he wants his money back. You guys need to resolve yourself. Return his money to him, so that we can give you your license and that was one week to go, how are we going to raise 3.9Billion naira in one week?

“They literally jumped into the arena. I don’t even know why NUPRC was entertaining his letters, because as far as I understand, we are the awardees, we were the ones that they should be communicating with, they had no business with Multiplan, only God knows what had happened to the point where they were entertaining him”.

After the one-week ultimatum, he noted that NUPRC did not give his company the license to the asset, insisting they pay back Multiplan’s money, and even threatened to withdraw their award saying they had applied to the presidency, to withdraw the award in ‘public interest’.

And so we went to NUPRC and said, Listen, you’re telling us to pay him back his money and you are writing this kind of letter, which investor in his right mind, do you think will give us money? What we need from you is a letter of comfort, to give us time to pay this money back. And just make clear to the investor that wants these things. And by the way, we were in arbitration to resolve this, because that was part of our agreement in the MOA. NUPRC did not even allow the arbitration process to go on when they jumped into the arena.

NUPRC’s threat to withdraw Magnumflo’s award heightened the company’s precarious position, prompting them to appeal for understanding from the commission and the challenges of securing investments amid the ongoing dispute.

Multiplan’s Okotete said: “At that point NUPRC called and intervened, they asked them to look for the money in  90 days and pay me back. NUPRC had written to withdraw the award because the company that paid is Multiplan. So, they explained that they would give the money back to me, till it elapsed, they did not pay, that was when they cancelled it and re-awarded it to me since we are the beneficiary and we bid too during the bid round,” he said.

He further noted that the license was awarded this year but he could not remember the specific month during an interview with Africa Oil+Gas Report.

“The license award was issued this year, it was the new Minister that issued it to us, the old arrangement was cancelled by the previous government, but the license and issuance were pending till the new Minister took office, because the Permanent Secretary could not sign. The award was withdrawn when we complained to NUPRC,” he noted.

In a letter dated 30, May 2023 signed by the Commission’s Chief Executive, Gbenga Komolafe, NUPRC conveyed a notice of withdrawal to Magnumflo.

According to the Commission, it noted that Magnumflo had ‘failed to provide consideration for the award, based on the legal principle that consideration must move from the promise’.

The NUPRC then re-awarded the 57.11% initially of Magumflo to MultiPlan.

Before withdrawing the award from Magnumflo, Africa Oil+Gas Reports found that Multiplan and Duport Midstream, another party involved, had already formed a Special Purpose Vehicle (SPV) named Ekpat Producing JV Limited.

The SPV with registration number 2014956, was created on December 28, 2022 which falls into the ultimatum given to the warring parties to resolve their dispute.

NUPRC’s alleged interference in favour of MultiPlan adds a layer of complexity to the commercial dispute between the companies. The regulatory body, tasked with overseeing the oil and gas sector, is now being accused of overstepping its mandate by entertaining grievances from one party over the other.

Magnumflo insists on being granted the license as the rightful recipient and also requests sufficient time for refunding MultiPlans’ signature bonus paid on its behalf, or alternatively, the reinstatement of their original agreement.

“What we want is that we should give us an opportunity to pay him back his money, if he says no, he really likes the asset, he will stick it up and work with us, then we want our 40% back, we are not disputing his 60%. But the issue is, if we’re going to work this asset, we need to work it properly. We have to have agreements in place that will ensure that corporate governance must be adhered to.

We are in court at the moment, the basis of going to court was to stop them from doing what they have done. And they’ve now done. The case will come up for hearing on December 14th,” Bakre said.

Africa Oil+Gas Report contacted the NUPRC to explain the reasons for interfering in a commercial dispute between two partners and eventually awarded the marginal field to Multiplan, the commission said ‘the government must also continue to send the message that investments in the oil and gas sector is secure and partnerships will be protected’.

NUPRC added that it received an approval from the President to award residual fields ‘to companies who participated in the bid round and demonstrated proof of funds. Multiplan entities met the criteria (and had won an asset directly in the bid round) and nominated this particular entity for the award of the asset, having paid the signature bonus’.

“The Commission will be urging the court currently hearing the case to follow the precedent laid down by the Federal High Court It is high time Nigerian courts cease to allow companies that lack the financial capacity to frustrate the development of petroleum assets. The government did equity between the parties by engaging in a year-long mediation process that failed to yield any fruit,” the Commission explains.

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1 comment

  1. Kayode Ayeni says:

    This is the problem with nigerian entities. How can a company make expenses of $550,000 without approval of majority equity in a partnership. I really don’t like the approach of Magnumflo in the matter. I think NUPRC should have forced the two parties to go back to the original agreement with magnumflo agreeing to the audit of the expenses.

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