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NNPC, Shell, Total, Mobil, others fleeced Nigeria of $4.4bn — NEITI

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…Under-payments not true —NNPC/NAPIMS

By Clara Nwachukwu & Michael Eboh
ABUJA — The Nigerian Extractive Industries Transparency Initiative (NEITI), yesterday, accused the Nigerian National Petroleum Corporation, NNPC, and other oil and gas companies of shortchanging the country and failing to remit $4.4 billion and N358.3 billion to the Federation Account in 2013.

This comes as Lagos-based indigenous chartered accounting firm, SIAO Partners, had been contracted by NEITI to carry out the 2014 audit, even as it is in the process of procuring auditors for its 2015 audit.

NNPC Towers, Abuja
NNPC Towers, Abuja

Minister of Solid Minerals and Chairman of NEITI Board, Dr. Kayode Fayemi, who disclosed this in Abuja, during the release of the 2013 Oil & Gas and Solid Minerals’ Audit Reports, also revealed that Nigeria lost $5.966 billion and N20.4 billion in 2013 to crude oil theft, Offshore Processing Agreement, OPA, and Crude Oil for Product Swap Arrangement.

Oil, gas earnings

The NEITI report further stated that the country earned $58.07 billion from oil and gas sector, dropping eight per cent from $62.9 billion realised in 2012, adding that the sum was earned from crude oil sales, taxes, royalties and other incomes.

Explaining the decline in oil and gas earnings in the year under review, NEITI attributed this to a drop in oil and gas sales, following divestment of federation equity in some oil assets and crude oil losses.

In addition, the report noted that N33.86 billion accrued to the federation from the solid minerals sector in 2013.

Broken down further, cement manufacturing companies accounted for N30.47 billion or 89.98 per cent of the total; construction companies, N1.98 billion or 5.83 per cent and; mining & quarrying companies, N1.42 billion or 4.19 per cent respectively.

Giving a breakdown of the figures in the oil and gas report, Fayemi said NNPC and its sub-units failed to remit $3.8 billion and N358.3 billion in 2013, while $599.98 million was under-assessments/underpayments of petroleum profit taxes and royalties by oil and gas companies.

In the case of the NNPC and its sub-units, the report stated that outstanding payments were due from unpaid considerations from divested Oil Mining Leases, OMLs, cash call refunds from the National Petroleum Investment Management Services, NAPIMS; and Nigerian Petroleum Development Company, NPDC, liftings from Nigerian Agip Oil Company, NAOC, Joint Venture, JV, among others.

Under-payments  not true  —NNPC/NAPIMS

But in a quick response, NAPIMS, the investment arm of the NNPC, in charge of vetting and approving oil and gas ventures and expenditure in Nigeria, insisted that it was not true.

NNPC’s spokesman, Mr. Mohammed Garbadeen, refused to pick his calls. But his NAPIMS counterpart, Mr. Laminu Ahmed, in a telephone response said: “I also read it (report), but it is not true. Let them cross-check the records because that amount is too high. Nobody can do such a thing and other organisations did not know until now.”

Ahmed argued that since NAPIMS approved all of the Joint Ventures, JVs and Production Sharing Contracts, PSCs, and other oil and gas industry investments in Nigeria, such underpayments “are simply not possible.”

NLNG dividends

Specifically, the report accused the NNPC of failing to remit $1.289 billion Nigeria Liquefied Natural Gas, NLNG, dividends, interest and loan repayment for the year under review, despite acknowledging receipt of the said amount from the NLNG.

To this end, the report stated that with the 2013 figure, the total NLNG payments received by the NNPC between 2005 and 2013, but not remitted to the Federal Government or the Federation Account, now stood at $12.9 billion.

The report also stated that the NNPC only remitted $100 million in 2014, of a total $1.8 billion expected from the divestment of its 55 per cent equity stakes in eight oil assets from the Shell JV to its subsidiary, the NPDC,  adding that the NNPC failed to pay for crude oil lifted from these oil assets on behalf of the NPDC.

Shell, Total, Mobil fingered in  under-payments

In the area of oil and gas companies shortchanging the country to the tune of $599.98 million, the report identified Total Exploration and Production Nigeria Limited, TEPNG; Shell Petroleum Development Company, SPDC, and Mobil Producing Nigeria Unlimited, MPNU, as the worst offenders in the area of under-assessment/under-payments in the Petroleum Profit Tax, PPT, validation, while SPDC, Shell Nigeria Exploration and Production Company (SNEPCO) and Pan Ocean were worst offenders in terms of royalty validation.

Specifically, Total, SPDC and Mobil were fingered in under-assessments/under-payments of $294.87 million, $53.9 million and $49.207 million respectively in Petroleum Profit Tax; while SPDC, SNEPCO and Pan-Ocean were fingered in $73.16 million, $50.946 million and $28.006 million royalty under-assessments/under-payment in the period under review.

However, none of the IOCs mentioned responded to Vanguard enquiries by calls, texts or electronic messages. While Total promised to provide its response tomorrow (today), Mobil urged that it be “allowed a reasonable response time, given the timing of your inquiry.” Shell simply did not offer a response of any kind.’’

JV/PSC valuations

With regard to JV and PSCs valuations, the NEITI report further said: “The value of under-assessment on the fiscal valuation of chargeable oil was over $431.5 million.

“The JV companies had the highest under-assessment of over $410.9 million followed by the PSCs with over $15.8 million and Marginal Fields/Sole Risks with $6.7 million.

“The under/over assessments were computed based on the advised pricing methodology by NNPC-COMD as against pricing methodologies used by the companies.

“For instance, SPDC applied a different pricing methodology against the prices advised by NNPC-COMD, resulting in revenue loss of over $6.2 billion in the last eight years.”

On royalty

In the area of royalty, the NEITI report stated that the lingering pricing dispute between International Oil Companies, IOCs, and the Nigerian government had resulted in revenue loss of over $4.2 billion in the last eight years.

The report added that “the royalty payable on crude oil by companies is a function of the value of the crude oil, which in turn is determined by the price. There have always been issues over the pricing mechanism to be adopted in the computation of royalty, that is, whether Official Selling Price, OSP, as determined by NNPC, or Realisable Price (RP), as determined by companies, should be used.

“Royalty under assessments decreased from $465 million, comprising 30 entities, in 2012 to $166.54 million, comprising 17 entities, in 2013, representing a decrease of 64 per cent. The under assessment recorded was mainly as a result of price differentials between the official government position and that of the oil companies.

“The Production Sharing Companies, PSCs, entities had the proportion of 34 per cent under-assessment, while the JV entities had 65 per cent. Total under assessment from marginal fields amounted to $443.182 million, representing one per cent. This was due to the fact that reconciliation meetings were held regularly with these indigenous companies and the Official Selling Price (OSP) was applied on their production.

“The prices applied by SPDC on its royalty computation continued to differ from the advised prices of NNPC-COMD. This difference resulted in an underpayment of $73.161 million for 2013.”

Fayemi, however, noted that despite the gap of three years, most of the issues raised in the two audit reports were still relevant today and should spur the public into asking further questions.

He said: “Now that these reports are out, I will like to call on the legislature to take keen interest in the audit findings in designing legislation for the extractive sector and in carrying out oversight functions.

“Apart from making our reports more timely, more responsive and more relevant, we intend to broaden our stakeholders’ engagement, widen our dissemination platforms, make our organization more fit-for-purpose, and create more avenues for directly impacting policy change.”

Gains of NEITI audits

In defence of the gains of its series of audits and implementation of recommendations, as well as closing the gaps in un-reconciled figures, NEITI told Vanguard on phone that it had recorded significant strides.

NEITI Director, Public Affairs, Mr. Orji Ogbonnaya Orji, said: “Most of our recommendations have been implemented or are being implemented.”

He listed the success areas to include the unbundling and restructuring of NNPC, which is ongoing; remittance of NLNG dividends into the Federation Account; implementation of the Single Treasury Account; cancellation of Offshore Processing Account; and removal of fuel subsidy which has been changed to price modulation

Un-reconciled figures

With regard to un-reconciled figures arising from what companies claimed they paid and what government agencies received, Orji said: “In this report, the un-reconciled figures are very marginal, less than one percent. This is because the companies and government agencies are now becoming more responsive on EITI issues.

“Some of those wide differences between what was paid and what was received in the past were because of attitude to the audit because nobody took note that anybody was coming to check. But now, the companies and the government agencies are more responsive in keeping accurate records. So the gaps are closing up.”

“Every year, our duty is to check how much the companies pay to government in form of revenues, including taxes, royalties etc and we also check how much of these monies paid were actually received by the government either through the accounts of the CBN or through the Accountant General of the Federation or to DPR and FIRS.”

Delay in publishing report

Orji also explained that the 2013 report was delayed due to the dissolution of federal boards, saying: “This report ought to have been published by December 31, last year, but because our board was dissolved along with other Federal Government agencies’ boards. By the EITI national standard, these reports should be published every two years as approved and released by the board.

“But at the point it was about to be released to the public by December 2016, there was dissolution of the federal Boards; our board has just been reconstituted in February, and we had to allow the board sufficient time to study the report, and approval has now been given, and we now release to the public.”



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