NNPC, Shell, Total, Mobil, others Fleece Nigeria $4.4bn – NEITI

Kayode Fayemi


The Nigerian Extractive Industries Transparency Initiative, NEITI, says the Nigerian National Petroleum Corporation and other international oil companies failed to remit $4.4 billion into the federation account in 2013

By Anayo Ezugwu  |  Jun 6, 2016 @ 01:00 GMT  |

THE Nigerian Extractive Industries Transparency Initiative, NEITI, has accused the Nigerian National Petroleum Corporation, NNPC, and other oil and gas companies in the country of short changing the country and failing to remit $4.4 billion and N358.3 billion to the Federation Account in 2013. A recent NEITI report 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.

The NEITI report also stated that the country earned $58.07 billion from oil and gas sector, dropping eight percent 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. Breaking down the earning from solid minerals, showed that cement manufacturing companies accounted for N30.47 billion or 89.98 percent, construction companies, N1.98 billion or 5.83 percent and mining and quarrying companies is N1.42 billion or 4.19 per cent.

Giving a breakdown of the figures in the oil and gas report, Kayode Fayemi, minister of solid minerals and chairman of NEITI Board, during the release of the 2013 Oil and Gas and Solid Minerals’ Audit Reports, 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, lifting’s from Nigerian Agip Oil Company, NAOC, Joint Venture, JV, among others.

The report also 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 percent 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.

With regard to JV and PSCs valuations, the NEITI report 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.”

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 percent.

“Total under assessment from marginal fields amounted to $443.182 million, representing one percent. 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 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. “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.”


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