The Nigerian Extractive Industry Transparency Initiative, NEITI, is advising the federal government to divest its stakes in the joint venture projects with international oil companies
| By Anayo Ezugwu | Jun 29, 2015 @ 01:00 GMT |
IN its bid to increase oil production in Nigeria, the Nigerian Extractive Industry Transparency Initiative, NEITI, has advised the federal government to sale off its stakes in oil joint ventures, JVs, with foreign partners. This will ease the funding issues and leakage of cash due to corruption and waste which have impeded the country’s oil production. NEITI on Monday, June 15, said the divestment would open the arrangement for private sector participation which would reduce the corrupt practices, waste and other leakages associated with the management of the JVs over the years.
NEITI’s recommendation is coming on the heels of a review of the industry by stakeholders to assist the reform programme of the new government. The opaque Nigerian oil industry needs urgent reform and President Muhammadu Buhari and the National Assembly is being urged to pass into law the Petroleum Industry Bill, PIB, by the end of August to demonstrate their patriotism and political will to promote transparency and accountability in the oil and gas sector.
The PIB is a piece of legislation intended to radically overall the country’s oil sector, but it has been stuck in parliament for more than five years. This has caused billions of dollars in new investments, especially in deep-water projects to be withheld from the industry. “Nigeria wants to raise oil production to 4 million b/d by 2020. Every year, NNPC has been unable to meet its share of funding, commonly referred to as cash calls, required to maintain and develop current and new oil projects.
“Oil companies have blamed funding shortfalls for the delay or outright scrapping of dozens of new projects, particularly those targeted at ending gas flaring, while they focused only on high priority projects. Nigeria’s funding challenge has been dealt a further blow by the slump in global oil prices. NNPC has slashed by 40 percent its proposed funding for oil projects this global oil prices year, while directing its foreign partners to begin an audit of projects at hand to determine which ones to drop,” it stated.
The federal government through the Nigerian National Petroleum Corporation holds an average 57 percent interest in joint ventures with Shell, ExxonMobil, Chevron, Total and Eni, which account for about 90 percent of Nigeria’s 2 million barrel per day oil output.
NEITI had on Tuesday, June 9, indicted oil and gas companies operating in Nigeria of defrauding the country to the tune of $19.1 billion, about N3.82 trillion, over the last couple of months. The agency called on President Buhari to ensure that the country recover the money from the companies.
NEITI, in a statement disclosed that the amount represents clear cases of underpayments, under-assessments of taxes, royalties, rents, among others. It stated that this was revealed in its several independent audit reports which have not been adequately addressed in the past.
Zainab Ahmed, executive secretary, NEITI, described the transfer of eight oil wells sold by the Nigerian National Petroleum Corporation, NNPC, to the Nigeria Petroleum Development Company, NPDC, in 2010 and 2011 as lacking in transparency and called for a full investigation into the transaction. She said: “The position of NEITI is that the whole transaction is not transparent. The Federal Government needs to carry out a full investigation into the sale to ascertain the actual cost of the oil blocks and revenue loss to the Federation in the whole transaction.”
Giving a breakdown of some of the amount the country has lost to oil and gas operators, she noted that $11.6 billion, about N2.32 trillion, which represents outstanding total dividends arising from loans and interest repayments from federal government’s investment in Liquefied Natural Gas, LNG, also needs to be recovered into government coffers.
She said: “Our 2012 Audit Report discovered that total dividend loans and interest repayment from LNG paid to the NNPC in 2012 was $2.8 billion. However, in the course of NEITI’s Audit NNPC was unable to provide any evidence to show that the funds were remitted to the federation as required by law. The total amount received by NNPC from LNG under the same circumstances which have not been remitted to the federation account stands at $11.6billion,” Ahmed said.