June 11, 2009

Reps indict 3 crude oil lifters of tax defaults

By Luka Binniyat & Tordue Salem
ABUJA — AFTER one of three unregistered companies (Carlson Oil Company Inc) netted about $3.87 billion as profit from lifting 40% of Nigerian crude in ten years, the House of Representatives and the Nigerian National Petroleum Corporation (NNPC) confirmed yesterday, that none of the three companies has paid a kobo in tax to the Nigerian Government since 1999.

Also, the House of Representatives has accused the NNPC of manipulating the prices of part of the 45,000 barrels of crude oil per day allocated it for its three refineries. The Reps said the NNPC sold part of the unrefined crude to some foreign companies yet to be identified at a discount, thus making the country to lose not less than N280 billion ($1.87 billion) between 2004 and 2007.

However, the NNPC has lamented that between February and April this year, vandalisation of oil infrastructure and theft of crude oil has led to a loss of N1 trillion in revenue.

These revelations were made at the Investigation of Activities and Operations of the NNPC, its Subsidiaries and Department of Petroleum Resources (DPR) from 1999 till date conducted by an ad-hoc committee of the House of Representatives made up of Rep. Igo Agoma, Bassey Otu, Leo Ogor, Clever Ikisikpo and Halims Agoda.

Asked on the guidelines used in determining what qualifies a company to lift Nigeria’s equity of crude oil from the Joint Venture partnership between the Federal Government and oil operating companies, the Group Managing Director (GMD) of the NNPC, Alhaji Mohammed Barkindo, said: “There are three main criteria.”

According to him, the company must have established some presence in Nigeria by way of investment and that the company must have been in the business for at least three years before applying to lift. He added that, there is also a bilateral angle to it.

“A country that buys our oil may present us with any company of their choice. And we would deal with it as a representative of the country. We have no business with what it does with the crude oil after”, he said.

After members confronted him with the presentation of the NNPC on the matter which showed that several companies did not fit into the criteria, he said there were exceptions in some cases.

The committee asked to find out why Napoil Limited (incorporated in Bermuda and sells Nigeria equity crude to North America), Vitoil-Carlson Corporation company (a Scotland-based oil trading firm) and Trafigora (a Switzerland-based energy company) have been lifting about 40% of Nigeria’s equity crude since 1999 till date but have no investment in Nigeria and have not been registered under the Company and Allied Matters Act, the GMD said it was one of the observed flaws he inherited when he came in.

“Napoil is registered in Bermuda”, he said, “but it is a dependable oil trading firm”, he said.

“Are you not supposed to ensure that only companies registered in Nigeria and pay tax are supposed to get businesses from the NNPC?” he was asked.

In response, he said, “it is not the business of the NNPC to ensure that companies pay tax. It is the work of the FIRS (Federal Inland Revenue Office) and the DPR.”
Oil firms in Nigerian are mandated to pay Petroleum Profit Tax (PPT).

Barkindo however regretted that if Nigeria had enhanced the capacity of the trading arm of the NNPC — Duke oil —  established in 1988, the problem would not have arisen.

He said that the corporation was doing all within its power to reverse the trend.
But the committee charged the NNPC to go back and calculate the volume of crude lifted by the three firms and the profit margin made in all their years of operation with Nigeria with the view of mandating them to pay their tax.

Also, the committee said that the NNPC had manipulated the daily 450,000 barrels of crude oil allocated it daily between 2004 and 2007 to defraud the country of about N288 billion within the period.

“In 2004”, said Rep. Agoda, “the NNPC sold 152 million barrels/day (mb/d) at $37.4 per barrel instead of $39.3 per barrel and as such Nigeria lost $293 million (N43.9 billion) for that year.”

He added that, “in 2005 the NNPC sold 162 mb/d of part of unutilised domestic crude allocation to Nigerian Refineries. But, it sold the crude that year at $54.1 per barrel instead of $55.1 per barrel”, he added.

After computing the losses between 2004 and 2007, he said, the total loss was N288 billion ($1.87 billion)

“We would want the NNPC to account for these losses within the next one week”.

He said that though the Nigerian Extractive Industries Transparency Initiative (NEITI) had commissioned some international auditing firms to look into the issue in 2005, the firms covered up the facts giving the NNPC a clean bill of health
But the GMD said that the NNPC has nothing to answer.

“This issue has been investigated by the NIETI, and we stand by what they said”, he posited. “But we will still put together these findings and submit to you”, he said.

Barkindo, speaking earlier, had told the ad-hoc Committee that the Government of Nigeria lost about N880 billion between February and April, this year.

“As at April 2009 alone, we had lost over N880 billion as a result of illegal bunkering and pipeline vandalism, while crude oil losses have amounted to over N113 billion, which are single-handedly borne by NNPC”.

The House of Reps investigation borders on allocation of products: High Pour Fuel Oil (HPFO) and Low Pour Fuel Oil (LPFO), Importation of Products, Refineries-Operations and Rehabilitations, NNPC subsidiaries: Crude Oil Marketing Division(COMD), Products & Pipeline Marketing Company(PPMC).

The Investigations continue today, with all former GMDs of NNPC and heads of its subsidiaries from 1999 to date expected to make representations.