Petroleum Corporation, NNPC, has said that there is no reason whatsoever for the Corporation to deceive or mislead the citizenry about its operations, especially on crude oil sales that generate over 70 per cent of revenue for the nation.

In response to an alleged publication of non-remittance of fund into the Federation Account, the Corporation explained that the story stemmed from a lack of understanding of how proceeds from crude oil sales are calculated.
In a statement by the General Manager, Media Relations Department of the NNPC, Dr. Omar Ibrahim, the Corporation clarified that the allegation is borne out of a misunderstanding of the workings of the oil and gas industry and the modality for remitting crude oil sales revenue into the Federation Account by the Central Bank of Nigeria, CBN’s Governor, Mallam Sanusi Lamido Sanusi.

According to him, the alleged publication is a recast of earlier report in the dailies credited to the CBN Governor, Non-remittance of the sum of $49.8bn into the Federation Account by NNPC, from January 2012 to July 2013.
He stated that, “for the avoidance of doubt, it is a well-known fact that revenue generation from the crude oil sales is based on four critical fiscal terms.

“They are royalty, cost oil (cost of running the business), Petroleum Profit Tax, PPT, and profit of the investor. Out of these four critical elements, NNPC is responsible for the payment of the Profit Oil, after removing the cost of running the business, into the Federation Account, while the Department of Petroleum Resources, DPR, and the Federal Inland Revenue Services, FIRS, is saddled with the responsibility for the royalty and PPT, respectively.
“Revenues from each of these categories are statutorily collected by different agencies of the government and paid into the Federation Account.

“The sum total of these proceeds make up the total revenue accruable to the Federation Account.
“As you may be aware, royalty, which is a first line charge accounts for between 0 oer cent (Production Sharing Contract, PSC) to 20 per cent in the traditional Joint Venture, JV, operations, while PPT ranges from 50 per cent (PSC) to 85 per cent in the JV. Thereafter, Profit Oil ranges from 7 to 18 percent.
“Based on the foregoing, the major contributor of revenue into the Federation from crude oil sales is Royalty and PPT. As such, a significant percentage of the revenue generated from crude oil sales is expected to be paid into the Federation Account through the DPR and FIRS.”

It is an established fact globally that royalty and PPT contributes over 75% of the total Government revenue (especially in the JV arrangements in all jurisdictions) derived from the proceeds of crude oil sales while the balance represents cost of production and profit oil.

“Therefore, the 24% of total crude oil revenue receipts which the publication acknowledged as a partial remittance represents the proceeds from the equity lifting which NNPC is directly responsible for in line with global trends. The alleged unremitted 76% was paid through the agencies that are statutorily empowered to receive them for onward remittance into the Federation Account”, Dr. Ibrahim explained.

“While the CBN said its computation, based on pre-shipment details, showed that Nigeria sold N10.3 trillion worth of oil in 19 months, some online publicationsfurther alleged that Nigeria should rather realize N10.6 trillion in the first 10 months of 2013 based on average daily production of 2.11 million barrels of crude oil sold at $105.84 per barrel.

According to NNPC, the Nigerian public may wish to know that the entire Federation Equity in JV is about 58%, hence only such equity and revenue derived from crude oil sales belongs to the Federation. As such, the alleged average daily 2.11 million barrels of oil converted to revenue for the Federation Account is an aberration as the online publication did not recognize equity holdings of the International and Indigenous Oil companies in the case of the JV and the economic interest of the Investors in the PSC in the entire value (revenue) chain.

NNPC believes the alleged publication is a clear demonstration of lack of understanding of the Petroleum industry operations and/or a well-orchestrated attempt to tarnish the image of the of NNPC and the present administration and most importantly a calculated attempt to deceive the Nigerian public as about 40% (representing about 900,000 barrels of oil per day) of the 2.11million barrels daily production is under the PSC regime that contributes less than 15% of the total revenue to the Federation Account annually. The low revenue generated from the PSC arrangement is due a significant portion of the revenue from the crude oil sales is used for cost recovery consequently contributing a small portion of the revenue into the Federation Account as profit oil which is barely less than 7%.

The General Manager, Media Relations of NNPC further stated that the balance of about 1.4 million barrels of daily production out of the 2.11 million barrels of daily production consists of about 58% Federal Government equity and 42% for the other JV partners. As such, the total crude oil receipts cannot be as stated by the online publication rather reconfirms data provided by the Office of the Accountant General of the Federation of N5.8 trillion between January and October, 2013.

He further stated that there is no reason whatsoever for NNPC to deceive or mislead the citizenry about its operations especially on crude oil sales that generate over 70% of revenue for the nation. However, the Corporation will continue to advocate that all stakeholders especially the Media to verify information before going to the press.

He stressed the need for the media to exercise constraints in their publication especially if information to be released has not be investigated thoroughly to ensure the generality of Nigerians are being provided with accurate and verifiable data devour of politics and sentiments. “It is also necessary to ensure media organizations publish balanced information on critical issues that affect the nation rather than sensationalize inaccurate information.

The citizens deserve better education and information rather than go public with misleading information that is capable of creating disaffection.” He expressed NNPC’s availability at all times to meet and share with all relevant stakeholders including the media to clarify issues.