FG loses $518m to oil swap, OPAs seals – NEITI

The Executive Secretary of the Nigeria Extractive Industries Transparency Initiative, Waziri Adio, made the disclosures in an interview with the Economic Confidential, the intelligence magazine

The Federal Government lost approximately $518 million to oil swap and Offshore Processing Agreements in 2013 due to inefficiencies by the Nigerian National Petroleum Corporation and its subsidiaries, the Economic Confidential is reporting.
The Economic and Financial Crimes Commission would soon be involved in investigating and prosecuting major culprits for appropriate sanctions over the revenue losses.
The Executive Secretary of the Nigeria Extractive Industries Transparency Initiative, Waziri Adio, made the disclosures in an interview with the Economic Confidential, the intelligence magazine.
Adio said the Federation lost $211.88 million to crude for product swap and $306.16 million of OPA, totaling $518 million.
Adio, who spoke against the backdrop of the just released 2013 Oil and Gas Industry Audit report, noted that the NNPC and its subsidiaries also withheld some of the monies that are due to government.
He said: “For instance, they withheld $3.8 billion and N358 billion respectively.
“Now let us break it down this way: If you remember NNPC divested some of its interests in Shell Joint venture, about eight Oil Mining Leases, to Nigeria Petroleum Development Company, $1.29 billionn from NLNG; N354 billionn from unpaid domestic crude debt; N3.98 billion from subsidy over-recovery in 2012; and N2.17 billion from cash-call refunds.”
Furthermore, Adio said the report discovered $4.7 billion from theft and vandalism in three Joint Ventures — Shell, Agip and Chevron; and N20 billion from not observing the 90-day credit time value of money at 12 per cent.
The issues captured, according to him, still needed further elaboration.
He said: “Now NNPC Divested 55 per cent in eight assets (OMLs) in Shell JV: OMLs 4, 26, 30, 34, 38, 40, 41, and 42.
“They were valued by by DPR at $1.8 billion, but according to Price Waterhouse Coopers.
“They should have been valued at $3.4 billion, given that Shell got $2.72 billion for its 45 per cent interest in those same assets.
“This then mean that Shell’s 45 per cent valued at 47 per cent higher than Federation’s 55 per cent.
“Let us look at it another way: Given the disparity between $3.4 billion and $1.8 billion, assets valued at 47 per cent loss or discount.
“But even with discount or loss, NPDC paid only $100 million, leaving an outstanding of $1.7 billion.
“This means that NPDC paid only 5.6 per cent of the discounted value of $1.8 billion and 3 per cent of actual value of $3.4 billion and yet enjoyed all the benefits, as oil from those assets lifted on behalf of NPDC and not the Federation.”
Speaking on the four assets under the Nigeria Agip Oil Company JV similarly divested: OMLs 60, 61, 62, and 63, Adio noted that no valuation was done on those four OMLs, no consideration paid and yet oil was lifted on behalf of NPDC, not the Federation.
He said despite the fact that 12 OMLs in the Shell and Agip JVs divested to NPDC and not fully paid for or not paid for at all, NAPIMS paid cash-calls on some of these OMLs, namely, $536 million paid as cash call on the four OMLs from Agip JV, $389 million refunded to NAPIMS, but refund not remitted to Federation, apart from an outstanding of $147.8 million not paid at all.
“There are also cash-calls also paid on some the divested OMLs from the Shell JV, which include $35.12 million refunded to NAPIMS, but refund not remitted to Federation. Records from NAPIMS showed request for refund of $414,000 and N249,272, 000 on OML 25 apart from request for refund of $2.17 billion on OML 42. You can’t imagine that these requested refunds were not made as at close of audits.”
Asked to explain the status of the Nigerian Liquefied Natural Gas Limited dividends, the NEITI boss said NLNG paid $1.28 billion to NNPC and the Corporation acknowledged receipts, but money not remitted to the Federation.
Again between 2005 and 2103, NLNG paid $12.9 billion to NNPC.
While NNPC acknowledge receipts, it did not remit it to the Federation.
Adio added: “If you consider losses to under-assessment/under-payments, you will discover $599.8 million was lost due to contested pricing methodology. Out of this amount, $432.5 million was lost to under-assessment for royalties and $168.3 million was lost to under-assessment for Petroleum Profit Tax.
“From the report we discovered that N1.3 trillion was processed as petroleum subsidies for 2013. This you can see is 34 per cent higher than the N970 billion appropriated for fuel subsidies in 2013. A careful look at the figures reveal that it is 26 per cent of the N4.98 trillion of 2013 federal budget; 30 per cent higher than total budget for education, health, water, and SUREP in 2013 budget.”
Adio further disclosed that NEITI is engaging the EFCC for further investigations and sanctions on the culprits.
He said: “The NEITI Act criminalizes some behavior and even put sanctions either in terms of fines and jails terms or both but did not give us powers to prosecute. That is why we are engaging the EFCC. The Acting Chairman of EFCC has pledged to set up a joint investigative team from both sides to come together and look at possible infractions.”