Wednesday, 24 October 2012 22:14
Thursday, 25 October 2012
Cut-price
oil deals made between some Federal Government officials and
multinational oil companies have cost the country N4.6 trillion
($29billion) over the past decade.A report by Financial Times and Reuters yesterday revealed the findings by Malam Nuhu Ribadu, former Chairman of the Economic and Financial Crimes Commission (EFCC) who was mandated by President Goodluck Jonathan in February, 2012 to uncover the rot in the oil sector.
The findings of the Petroleum Revenue Special Task Force uncovered widespread inefficiencies, graft and criminality in the petroleum sector, costing Nigeria billions of dollars yearly.
The Ribadu Panel produced the 146-page study which covers year 2002 to the present.
Ribadu’s report estimates that industrial-scale oil theft of up to 250,000 barrels per day, or 10 per cent of total production, is worth $6.3 billion a year, and may be reaching “emergency levels”.
Missing revenue from signature bonuses and unpaid debts of oil companies also ran into billions of dollars, the report concluded.
The findings will increase pressure on President Goodluck Jonathan to clean up the sector, which accounts for almost 80 per cent of government revenues.
The report said existing laws and agreements with oil companies were “outdated, do not reflect current economic or legal realities; or include ambiguous clauses”.
The Petroleum Revenue Special Task Force was asked to verify the government’s income from oil and gas across the industry, and make recommendations to the Ministry of Petroleum Resources.
However, the report does not suggest that oil companies or traders acted illegally, but highlights the opacity of their operations and agreements.
It said the gas revenue losses accrued in dealings with Nigeria LNG (NLNG), a company owned by the Nigerian National Petroleum Corporation (NNPC), as well as Shell, Eni and Total.
The price at which feedstock gas was sold to the NLNG “seems too generous, compared to prices obtainable on the international market,” the report said.
“The estimated cumulative of the deficit between value obtainable on the international market and what is currently being obtained from NLNG, over the 10 year period, amounts to approximately $29 billion.”
Discretionary decision-making in awarding oil blocs – a key way of rewarding political patronage in the country – was also causing big revenue losses, the report found.
Genuine bidders were put off by the process, while money went uncollected.
Of the seven discretionary licences awarded since 2008, $183 million in signature bonuses remained unpaid.
Ribadu was also sharply critical of the way the NNPC sold its crude to traders, including some with no expertise, noting that Nigeria was “the world’s only major oil producer that sells 100 per cent of its crude to private commodities traders, rather than directly to refineries”.
In addition, Nigeria imports most of its fuel needs because its refineries are too small and poorly maintained.
Nigeria is Africa's largest crude oil exporter, shipping more than two million barrels per day (bpd), and is also home to the world's ninth biggest gas reserves and one of its largest Liquefied Natural Gas (LNG) export terminals.
The report provides new details on Nigeria's long history of corruption in the oil sector, which has enriched its elite and provided the oil majors with hefty profits while two thirds of people live in poverty.
Petroleum Resources Minister, Mrs. Diezani Alison-Madueke, told Reuters on Tuesday she had received the report last month but that it was a draft and the government was still supposed to give input.
The one seen by Reuters was labeled "Final Report."
Ribadu's probe was among several set up following a week of nationwide strikes against a rise in fuel prices in January, which morphed into a campaign against oil corruption.
Billions of dollars of revenue was missing in unpaid debts from signature bonuses and royalties, the report found.
"The estimated cumulative of the deficit between value obtainable on the international market and what is currently being obtained from NLNG, over the 10 year period, amounts to approximately $29 billion," the report said.
It also said foreign oil firms had outstanding debts, insisting that some international oil traders, who were not "on the approved master list of customers" had been sold crude oil "without a formal contract" so little could be obtained about the details of these deals, which can be worth hundreds of millions of dollars.
"This logically will serve to reduce margins obtainable on sale of crude oil," the report said.
The report said the NNPC made N86.6 billion over the 10-year period by using overly generous exchange rates in its declarations to the government.
There was no sign of the money.
Petroleum Ministers between 2008-2011 handed out seven discretionary licences but there is $183 million in signature bonuses missing from the deals, the report said.
Three of these oil licences were awarded since Mrs. Alison-Madueke took up her position in 2010, according to the report.
"I have not given any discretionary awards during this administration," Mrs. Alison-Madueke told Reuters, although she added that the President had the right to do so instead of using bids if he saw fit. "That is entirely up to him," she said.
Among the report's recommendations were that parts of NNPC be reorganised or scrapped, an independent review of the use of traders be set up and a transparency law be passed requiring oil companies to disclose all payments made to the country.
SOURCE: 25 October 2012.
