FG, Shell, others lose $14.8bn to shady deals in oil sector

• Report: NNPC failed to remit $12.3bn proceeds in 10 years

Nigeria and three International Oil Companies (IOCs) operating in the country, Shell, Chevron and Eni, lost about $14.8 billion to crude swap and oil theft in four years. A new data released by auditors at the Extractive Industry Transparency Initiatives (EITI) revealed that while the three oil majors lost $13.7 billion to crude theft during the period, the Federal Government lost $1.1 billion to the crude swap.

According to Executive Secretary of Nigeria Extractive Industry Transparency Initiative (NEITI), Mrs. Zainab Shamsuna Ahmed, three of Nigeria’s foreign oil partners recorded a total loss of about 160 million barrels of crude oil with an export value of $13.7 billion from 2009 to 2012. Nigeria, Ahmed said in a statement, also lost about $1.1 billion through the crude swap for oil products programme supervised by the Nigerian National Petroleum Corporation (NNPC) over the same period. “Data from the NEITI Audit reports show that Nigeria lost about 160 million barrels of crude oil valued at $13.7 billion to crude oil theft from 2009- 2012.

“The record was from three international oil companies; Shell Production and Development Company, Nigerian Agip Oil Company and Chevron Nigeria Limited,” Ahmed said. Also yesterday, an international governance watchdog said the president should overhaul how Africa’s biggest oil producer sells its state oil company’s share of crude oil output to save billions of dollars in wasted and lost revenues. About half of Nigeria’s two million barrel per day (bpd) crude output goes to NNPC that sells half of the quota to its subsidiary, Pipelines and Prod-uct Marketing Company (PPMCC) for the country’s refineries.

The poorly maintained plants are however unable to process the bulk of the oil and over the years this allocation has devolved into a “nexus of waste and revenue loss,” according to the report by Natural Resource Governance Institutes (NRGI), a non-profit. The other half of NNPC’s oil share is mostly sold to “unqualified intermediaries,” earning significant margins for little or no added value, rather than directly to the endusers, NRGI said. A spokesman for NNPC declined to comment on the report. Reducing losses in crude oil sales has become even more crucial with the slump in global oil prices that has crushed Nigeria’s currency and forced the government to borrow just to cover salaries.

As the refineries became increasingly dilapidated under successive administrations, NNPC came up with ad-hoc substitutes such as the poorly constructed crude-for-product swap contracts or exports to select traders. “The refineries only process around 100,000 bpd. NNPC ultimately re-routes most…and payments enter separate NNPC accounts, which NNPC officials then draw upon freely,” NRGI wrote in its report, adding that NNPC explanations for its spending were incomplete and contradictory.”Discretionary spending” of the proceeds from this oil has shot up to over $6 billion a year from 2011 to 2013 and was spent on a graft-ridden fuel subsidy scheme, ineffective pipeline protection contracts and costly crude transport by sea to the country’s refineries since their feedstock pipelines were left to rot,” the report added. In 2013, just 58 per cent or $16.8 billion of these revenues were remitted to the Federation Account.

NRGI recommends eliminating the mismanaged refinery allocation completely, which would be a quick win for Buhari before a full restructuring of NNPC can be undertaken. About 210,000 bpd of the domestic allocation, or $35 billion worth of oil, was converted to crude-forproducts swap contracts starting in 2010 that are now being scrutinised by Nigerian authorities for short-changing the government. According to estimates by NRGI, about $16 a barrel could have been lost in 2011 alone under one offshoreprocessing agreement.

Questionable revenue retention is not limited to the use of the domestic crude allocation but extends to all areas. One stark example found by NRGI was the non-remittance of revenues from a decade’s worth of production from one field totalling $12.3 billion between 2004 and 2014.

The oilfield that produces the Okono grade is owned by NNPC’s upstream subsidiary but the operations have been contracted out, and therefore it does not need to keep such large sums. “In other words, the corporation has provided no public accounting of how it used a decade’s worth of revenues from an entire stream of the country’s oil production,” the report said