A pilot study on the petroleum
industry conducted by the Nigerian Extractive Industries Transparency
Initiative (NEITI) has revealed that the Nigerian National Petroleum
Corporation (NNPC) short-changed the federal government by failing to
remit N77.92 billion earned from crude sales into the federation account
in 2017.
The report, released by the Executive
Secretary of NEITI, Mr Waziri Adio, also revealed that the total revenue
from the sale of federation share of oil and gas for 2017 was $14.5
billion—$13.18 billion or 90.8% from crude oil and $1.32 billion or 9.1%
from gas.
The report added that the NNPC deducted
N297 billion from earnings from the domestic crude allocation as costs
and losses, broken down as follows; N141.6 billion for under-recovery on
petroleum products (subsidy); N25 billion for crude and product losses;
N130.4 billion for pipeline repairs and maintenance.
It said the NNPC acknowledged the
under-remittance and stated that there was an ongoing reconciliation to
net off the N77.92 billion from “the established Federation indebtedness
to the Corporation of N797bn arising from KPMG Forensic audit of the
Corporation at the instance of the Federation.”
The total crude oil production for 2017 was
692 million barrels. Out of this volume, the share that went to the
federation was 240.9 million barrels representing 35% of the total crude
oil production for the year 2017.
“A trend analysis for the year under review
shows that the 2017 federation share was 4% higher than the 231.6
million barrels in the same category for 2016 but was 19% lower than the
297.8 million barrels for 2015. This shows that while there was a
slight improvement on the figure for 2016 (a year characterized by
vandalism and sabotage of oil facilities), crude production for 2017 was
about a fifth less than the 2015 level”, NEITI noted.
A further breakdown of key findings in the
report show that 240.9 million barrels federation share for 2017 was
disaggregated as follows; domestic crude Allocation (DCA): 105. 9
million barrels or 44% of federation share; FIRS liftings: 57.3 million
barrels or 24% of federation share; federation export: 50. 2 million
barrels or 21% of federation share; third party Financing: 17.6 million
or 7% of federation share; DPR liftings: 9.9 million barrels or 4% of
federation share.
In turn, the 105.9 million barrels for
Domestic Crude Allocation (DCA), the crude assigned for local supply of
refined products, was further allocated as follows:
Direct Sale Direct Purchase (DSDP): 72. 8
million barrels or 69% of DCA; refineries: 26. 5 million barrels or 25%
of DCA; product exchange: 4.7 million barrels or 4% of DCA; Export
(unutilized portion of DCA): 1.9 million barrels or 2% of DCA.
The 136-page report shows that the
federation crude went to 29 destinations in 2017. The top-five
destinations were: India with 41.3 million barrels (17.12%); USA, 30.6
million (12.72%); local refineries, 26.5 million barrels (10.98%);
Netherlands, 22.9 million barrels (9.5%); and Spain, 21 million barrels
(8.83%).
There were 60 individual and
consortiums of buyers of federation’s crude in 2017. The top five buyers
were; Duke Oil Company, the trading arm of NNPC, which lifted 29.3m
barrels or 12.16%; TOTSA/Total oil Trading, which lifted 18.4m barrels
or 7.67%; Port Harcourt Refinery which lifted 18m barrels or 7.49%;
SIR/Sahara Energy Resources which lifted 15.2m barrels or 6.32%; and
LITASCO SA/MRS Oil and Gas which lifted 10.5m or 4.38%.
The pilot study, however, clarified that
the report does not cover other revenue streams from the sector such as
Petroleum Profit Tax (PPT), royalties, signature bonuses, dividends,
penalties and fees, statutory payments etc. The Executive Secretary
added that other details on production and processes will be in the 2017
NEITI oil and gas industry report which is scheduled for release soon.
The study conducted by BDO, an
international auditing and advisory firm covered four government
agencies and 73 companies. The 73 companies included the following: six
bilateral companies, 13 international trading companies, four trading
arms of international oil companies, 25 Nigerian trading companies, two
NNPC trading companies, nine refineries, and 14 DSDP contractors.
The report contained lessons learned
from the pilot and recommendations on how to improve subsequent
exercises, especially in terms of adherence to audit data assurance
processes and compliance by trading companies in filling out templates
to ensure reconciliation with data from Nigeria’s state-owned
enterprise, NNPC.
The report also contains details of the
buyers’ selection process, the names of buyers/traders of Nigeria’s
crude, destinations of the crude, the vessels details, bill of laden
dates, pricing options, sale prices and actual payments, payment dates,
products supplied by type, cargo, supplier, supply date, volume, unit
cost, demurrage etc.
While releasing the Report titled
“pilot study on commodity trading for 2017” the Executive Secretary of
NEITI, Mr. Waziri Adio stated that the special report was undertaken in
furtherance of the recent decision of the global Extractive Industries
Transparency Initiative (EITI) to add commodity trading transparency to
its scope of coverage through stand-alone and in-depth reports. The
objective, Mr. Adio stressed, was to ensure adequate returns to
governments, increasing competition and efficiency in commodity trading,
and ensuring greater public scrutiny of the resultant revenues.
The NEITI Executive-Secretary further
stated that, “resource-rich countries receive shares of minerals
produced in their territories as equity shares or as in-kind payments,
and these minerals are usually sold directly or indirectly to commodity
traders through state-owned enterprises. However, the process and
details of these sales are mostly shrouded in secrecy, even when more
than half of the revenues from the extractive sector come from these
sales. This is why the EITI resolved to beam more search-light on
commodity trading. Nigeria is one of the five EITI-implementing
countries selected to pilot this enhanced focus.”
Apart from the pilot studies, EITI has
convened a global working group on commodity trading transparency,
comprising representatives of trading companies, governments,
state-owned enterprises, academics, donors and civil society groups.
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