BY EMMAN OVUAKPORIE & LEVINUS NWABUGHIOGU
ABUJA — Nigerian National Petroleum Corporation, NNPC, yesterday, denied entering into any form of clandestine oil business arrangement with two Swiss oil trading companies, Vitol and Trafigura, to defraud Nigeria of billions of dollars.
Instead, the corporation insisted that its pricing strategy was aligned to international best practices obtained in the oil industry.
Group Managing Director of the corporation, Mr. Andrew Yakubu, gave the testimony at an investigative hearing at the House of Representatives.
The investigation, entitled, ‘Urgent Need to Investigate Alleged Connivance of Nigerian National Petroleum Corporation, NNPC, with Swiss Oil to rob Nigeria of billions of dollars,” was organised by the House Committees on Petroleum Resources (Upstream and Down Stream).
Yakubu said: “The prices of oil were determined by Platts. Honourable Chairman, we affirm that the claims by the “Bernes Declaration” are baseless and without material substance and request you to set it aside in its entirety.
“We submit that our pricing strategy is aligned to international best practice in the industry. Our prices are based on a reference to the benchmark of crude Brent whose prices are published by Platts for the international trading community, a premium/ differential for individual crude grades and the selection of an option.
”Average of five consecutive day publications by Platts provides about 97 per cent of the value of any of our crude blends with differential/premium account for about three per cent of the total value.
“The differential/premium are established based on a wide range of publications (Platts, Argus, LOR, etc) and internal market assessment by the Corporation for all crude grades.”
Yakubu also defended the popular practice of selling crude oil for refined product, saying it was a typical procurement strategy.
He added: “The NNPC Act mandates the Corporation to supply petroleum products to the Federation as supplier of last resort. In order to meet this obligation, 445,000 barrels of crude oil is assigned to the Corporation at international price for domestic refining.
“The Corporation disposes unrefined portion of the assignment through direct export or other secondary arrangements, including “Swap,” to ensure procurement and delivery of refined petroleum products.”
The “Swap Arrangement” referred to by the “Bernes Declaration” is a known practice in the industry where equivalent value of product is exchanged for crude oil off take. This is a typical procurement strategy for supply constraint but resource dependent nations to hedge for supply security challenges.
“It is to be noted that the NNPC delivers the international market value of the crude to the Federation on the basis of the General Sales Agreement and Conditions. There is, therefore, no value loss to the Federation.”
Earlier in his speech to declare open the hearing, Speaker of the House of Representatives, Aminu Tambuwal, represented by Ali Ammed (Kwara State), said the country was in such a critical time that revenue losses would not be tolerated.
”Its importance is predicated on the fact that outside of the collet aural issues of fraud and economic sabotage; as a country, we cannot afford any loss in revenues, giving the enormous challenges facing the country,” Tambuwal said.
Similarly, the Chairman of the Committee, Muriana Ajibola, who doubled as the Chairman, House Committee on Petroleum Resources (Upstream), in his welcome address, stated that the committees’ mission was to investigate the allegation and make appropriate recommendations to the House.
”Given the strategic role revenue from oil plays in our national economy, the Committee will undertake this investigation with every sense of seriousness in order to make appropriate recommendations to the House,” Ajibola said.