BARKINDO DIVERTS 125M BARRELS OF OIL IN 15 MONTHS

-Vessel names & Loading Dates Published

The sack, last week, of Dr. Mohammed Sanusi Barkindo by an announcement from the office of the Acting President, must have been precipitated by the uncovering and report of a massive act of suspected fraud in the sale of Nigeria’s all important crude oil, investigation has revealed. Emerging revelations from the Abuja headquarters of the Nigeria National Petroleum Corporation indicate that the all powerful national petroleum agency has transformed into the epicentre of sleaze in government administration. Sources in the Presidency confided that the sack of Barkindo, the showy Group Managing Director of the NNPC, is the beginning of the daunting process of unearthing powerful officials that have become institutionalized in the structure and management of the NNPC.

Barkindo, as GMD of the NNPC, in the consideration of oil industry stakeholders, represented the pre-eminence of the group of officials in the NNPC and the larger petroleum ministry, who have continued to expropriate the oil resources of the country for personal gains. Under Barkindo’s watch, more than 125 million barrels of crude oil were diverted between January 2009 and March 2010. See Document A-D for details of vessel names, loading dates and quantity lifted. Also counted in that group is Mr. Aminu Babakusa, the NNPC’s current Group Executive Director, Commercial and Investment, in that class also was the dropped Minister of Petroleum Resources, Dr. Rilwan Lukman and a host of former Group Managing Directors of the NNPC, who, sources claim still benefit largely from the booties of crude oil diversion by the successor members of the cabal who still hold sway at the NNPC.

THE CABAL AT WORK: HOW THEY DIVERT CRUDE OIL SALE FOR PERSONAL GAINS

As reported in last week’s edition of this magazine, a select group of officials in the NNPC and the Petroleum Ministry have established an enduring platform by which they continue to divert crude oil sale opportunity to their preferred middleman at discounted premium leaving enough premium margin for the cabal members when the middle man sells off the crude in the international market.

In direct response to the exposure of undercutting the nation’s income template by this magazine last week, the NNPC’s Group Executive Director, Commercial and Investment, Mr. Babakusa, stridently denied the revelations of how the cabal of top officials of NNPC and the Petroleum Ministry profited from discounting premium payable on each barrel of crude oil to the preferred middleman. At the centre of the premium shaving fraud are two companies, Calson (Bermuda) Limited and Hyson Nigeria Limited. These two, may have, however, developed into bogus companies because rather than serve the purpose for which they were set up, they have unfortunately become conduit pipes through which incomes potentially accruable to Nigeria are diverted to the membership of the cabal.

PURPOSES FOR WHICH THE COMPANIES WERE SET UP

Calson (Bermuda) Limited is a joint venture company collectively owned by the NNPC and Vitol Energy (Bermuda) Limited, Vitol, in 1994, inherited the 49 per cent shareholding initially owned by Chevron in 1993, the year of establishment of the company.

The objectives of the company as stated in Article 1 of the Shareholder Agreement are as outlined:

a. To penetrate the West and Central Africa market in an orderly competitive and profitable fashion;

b. Ensure substantial improvement in the export of petroleum products from Nigeria, in particular from the Port Harcourt refineries;

c. Expedite the efficient and appropriate transfer of know-how in international oil trading and related activities from Vitol and/or its affiliates to NNPC’s designated employees and nominees; and

d. Provide NNPC with means of increasing its flexibility in marketing of crude oil and petroleum products by processing and sale of crude oil and/or refined products in West Africa, and Central Africa and else where.

The agreement provides that NNPC would ensure a minimum supply of 30,000 barrels a day for the trading needs of Calson. It turned out this was just a window to divert millions of barrels of crude oil a day.

Hyson Nigeria Limited which is also a joint venture company between the NNPC and Vitol was set up, among others to provide logistic and operational services to Calson. Like Calson, Vitol also inherited the initial 40 per cent equity holding in the company from Chevron.

WHAT THE NNPC’S EXECUTIVE DIRECTOR, COMMERCIAL AND INVESTMENT, BABAKUSA, SAID IN DEFENCE OF THE PREMIUM SHAVING ALLEGATION

In his attempt to clear the name of the NNPC in the crude oil price premium shaving fraud, Babakusa, who, incidentally, is the Chairman of the board of directors of Calson explained that Calson is only allocated crude oil from the 450,000 barrels which the Federal Government sells to NNPC at the international price, with the original intention of being refined by the Port Harcourt, Warri and Kaduna refineries.

According to him, because these refineries cannot refine the 450,000 barrels allocated to them and they are most often, down, the NNPC resorted to selling some of the crude allocated to the refineries “and once we do that, the Crude Oil Marketing Department will then invoice NNPC at the international price. Babakusa said that the NNPC will then sell to Calson and Calson will pay directly to NNPC account which then remits the proceeds to the Federation Account. As he tries to wave off the premium shaving allegation, Babakusa said that each barrel is cost along with plats price.

“Each barrel is priced within the average of five days then you put certain premium in the market. These premiums come on daily basis as the market dictates what that premium is because there are times when our own oil is not attractive to certain market.

“So anytime we want to do it, we take five days back and take an average price at anytime crude is lifted. If there is a premium you add the premium and if it is negative you deduct it but most of the Nigerian crude attract positive premium. Sometime it is five cents, 10 cents, one dollar or even more,” Babakusa said during the chat to dismiss the allegation of crude oil price premium shaving fraud.

He added that Calson does not sell to customers at the open market, preferring to use Vitol as a middleman because it (Calson) lacked the expertise to do open trading.

PUNCTURING BABAKUSA’S BRAZEN ATTEMPT TO HOODWINK NIGERIANS

Babakusa’s half truth half lie explanation is indicative of the typical public servant resort to technicalities to hoodwink the people. Documents available to Fortune&Class Weekly have shown that rather than the maximum 450,000 barrels sold to Calson by NNPC, between January 2009 when Barkindo assumed duties as NNPC’s GMD and March 2010, the NNPC had diverted more than 125million barrels of crude oil to Vitol using Calson merely as a conduit pipe. See Documents A-D.

Babakusa lied again in trying to suggest that NNPC sells crude oil to Calson which in turn pays directly to NNPC’s account. Documents have shown that NNPC peremptorily directs Calson to offer the allocated crude oil cargo Vitol, even though Calson would have been recorded in NNPC books as the company nominated to lift the crude oil cargo. (See Document E for a typical letter of crude oil lifting nomination and the stamp on the letter recommending that the cargo be offered to Vitol)

Babakusa’s explanation on selling at premium is unfortunately, a shameless lie. Since 1994 when NNPC signed the joint venture agreement with Vitol, it has become the tradition to offer the cargo through Calson to Vitol at a premium of a mere three cents. The question is what happens to the rest of the premium which Babakusa himself agreed could be as high as one dollar because of the quality of the Nigerian crude oil. Beyond this postulation, it has been established that the Nigerian crude attracts as much as four dollar premium in the international market. If one multiplies even a dollar premium earned by 125million barrels of crude oil diverted to Vitol through Calson during the Barkindo’s era at the NNPC, this should come to a whopping $125million (N2.37billion) in about 15 month.

This, according to a source, is shared out by the NNPC Group Managing Director to his trusted Directors, the Ministry of Petroleum top officials and some select NNPC’s former GMDs. Babakusa belatedly tried to cover up NNPC fraudulent conduct by attempting to explain away the incapacity of Calson to sell crude oil directly to customers in the open market because it lacked the expertise to do open trading. This explanation is faulty on two grounds; the first is that the top management of NNPC compels Calson, its subsidiary, to offer allocated cargo to Vitol which would now sell at the open market. A petroleum industry stakeholder said that what would have been normal would be for Calson to sell using the expertise of its partner, Vitol.

“The crude oil sale should reflect the facilitation of Calson which is a joint venture of both NNPC and Vitol. There is something absolutely fishy when the joint venture partner is now treated as an independent entity acting only by and for itself soon after Calson hands over the cargo to it as directed by NNPC,” the stakeholder argued. It was in an attempt to free Calson from the stranglehold of the NNPC’s cabal and their Vitol collaborators that the incumbent President (Chief Executive) of Calson (Bermuda) Ltd., Mrs. Aisha Abdurrahman, who broke away from the corrupt tradition of the past, to inform in a March 24, 2010 letter addressed to Mr. Paul Greenslade of Vitol that Calson will henceforth trade its crude oil at competitive price in the open market, starting from May 2010. (Please see Document F for full text of the letter from Calson President to Vitol). Babakusa’s reasoning that Calson could not undertake crude oil sale because it lacked the necessary expertise is a direct indictment of the decision making echelon of NNPC and its supervising ministry. As noted earlier, fundamental objective for the establishment of the company was for Vitol to transfer the crude oil trading know-how to NNPC officials seconded to Calson. More than 20 years after the establishment of Calson, Mr. Sodipo, Babatunde Adebayo, a NNPC staff, in a recent paper on International Oil Trading and Nigerian Content Development in Calson (Bermuda) Limited, submitted that NNPC has not been able to develop its human skills capacity in the area of international oil trading through the Calson (Bermuda) Ltd joint venture agreement. He also noted that NNPC secondees to Calson are currently involved only in financial, treasury, office administration and in the local Nigerian logistic function of Calson. This is even as he observed that NNPC secondees do not have hands on knowledge of the core operations of Calson.

BARKINDO WAS CEO AT CALSON BEFORE NNPC’S GMD’S APPOINTMENT

The various under-hand deals and how Nigeria continually gets short-changed can’t possibly be new to Barkindo. Before his appointment to the office of the NNPC GMD, he was Managing Director/Chief Executive Director of Calson/Hayson. To be continued

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One Response

  1. Dear Mr. Niyi Akinsiju

    I was very interested to read your articles, particularly – “BARKINDO DIVERTS 125M BARRELS OF OIL IN 15 MONTHS”.

    I tried to view Documents A-D for details of vessel names, loading dates and quantity lifted, however I was not able view the documents clearly enough. Were you able to send me clearer copies thanks.

    We have also been trying to facilitate the access to genuine off-take allocations of crude for our respected refinery partners and resellers, but have come across a myriad of problems to get the real allocations and check the vessels available in international waters to conduct Q&Q and pay via TT for “TTO” deals.

    Your feedback is appreciated.

    Kind regards
    Johnny Cates

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