*Govt loses billions of dollars in unpaid royalties

FRAUD and other infractions in Nigeria's critical oil and gas industry are enough to derail any stable economy, going by the report of the Petroleum Revenue Special Task Force by a former chairman of the Economic and Financial Crimes Commission (EFCC), Mallam Nuhu Ribadu.

The findings, which President Goodluck Jonathan has ordered to be submitted to him by next Friday, show that the nation has lost over N16 trillion revenue in the last 10 years, from avoidable deficits and criminal poaching of material resources in the industry.

In the official report, which The Guardian got yesterday, N10 trillion was lost to crude oil theft, from a yearly loss of 250,000 barrels per day or N1 trillion yearly, from computations made by the international oil companies and government officials.

In the period under review, N178 billion worth of refined petroleum products was stolen from the pipelines, through vandalism orchestrated by thieves.

The task force also discovered $5 billion (N785 billion) short-payment from sale of domestic crude oil to the Nigerian National Petroleum Corporation (NNPC), while the latter also recorded a deficit of N298 billion from the accounts of its 16 subsidiaries.

Also, $183 million (N28.7 billion) remained outstanding from signature bonuses. The Department of Petroleum Resources (DPR) recorded another $2.9 million (N455 million) outstanding from its various concessionaires.

A total amount of $3.027 billion (N475.2 billion) was recorded by the task force as outstanding royalties, with Addax Petroleum alone defaulting by $1.5 billion in 2003 fiscal regime.

In the gas industry, the nation lost $29 billion (N4.55 trillion) to deficit payment from the sale of Liquefied Natural Gas (LNG), while $115 million (N18 billion) outstanding was discovered unreconciled from the amount of penalties for gas flaring. And even $58 million (N9 billion) remained uncollected from the companies that were penalized.

The reported stated: "Hydrocarbon theft was found by the Task Force as being a major and chronic source of revenue loss to Nigeria. Theft of crude oil and refined petroleum products may be reaching emergency levels in Nigeria.

"The Task Force observed various estimates by International Oil Companies and Government officials of the scale and volume of crude theft, which ranged from 6 to 30 percent of production.

"While the Task Force does not endorse any of the numbers it received, we note that it could actually be as high as 250,000 barrels per day closer to 10 per cent of daily productions amounting to as high as N1 trillion annually. This issue therefore requires immediate attention.

"The Task Force did not receive comprehensive figures documenting volumes of refined products stolen or spilled. PPMC also recorded 4,468 product pipeline breaks in 2011, 98 percent of them from sabotage; and values the products stolen from its pipeline network between 2001 and 2010 at N178 billion".

It went on: "Our review of the records received for 2002 to 2011 showed an inconsistent pattern in the implementation of the policy to allocate 445,000bpd allocation to NNPC, with variances found for the ten years reviewed.

"The Task Force also compared the average price per barrel payable by NNPC for Domestic Crude with the average weekly prices for Nigeria Bonny Light, Forcados, obtained from the Energy Information Administration (EIA).

"The review revealed that over a 10 year period (2002 -2011), the state may have been short paid by an estimated sum of $5 billion, although it was understood from discussions with NNPC officials that the pricing of domestic crude oil was based on international prices.

" Enquiries from NNPC revealed that up until October 2003, NNPC was granted fixed price regimes which explain the wide disparity in prices in the earlier years.

"The Task Force found that the exchange rates used in arriving at the Naira equivalent of the amounts payable differed from the CBN rates for six (6) of the ten (10) years reviewed.

"The potential underpayment of amounts payable to the Federation Account over the 10- year period is estimated at N86.6 billion.

"Also, the Task Force?s review of the domestic crude utilisation showed that the percentage not refined in- country ranged from between 50 per cent to 88 per cent over the 10 year period.

"Equity Crude represents government's share of crude oil production (excluding domestic crude) obtained mainly from three (3) arrangements: Joint Operating Agreements (JOA) with IOCs, Production Sharing Contracts (PSC) and Service Contracts. Equity Crude Oil proceeds are remitted into the Federation account as export proceeds, DPR accounts as Royalties and FIRS accounts as Petroleum Profit Tax.

"The Task Force observed that there is no single point accountability for the income and expenditure streams of upstream petroleum operations, compounded by the current structure of NNPC such as multiple roles executed through NAPIMS and its COMD.

"A decline was also observed in national investments that would increase the nation's proven reserves. Accordingly, despite the increase in crude oil production in Nigeria over 14 years, the nation's entitlement has decreased as a result of various alternative funding arrangements for its upstream investments.

"The Task Force found that legislation governing the industry and agreements with third parties are outdated, do not reflect current economic or legal realities; or include ambiguous clauses. Also, there are some provisions within the legislation Government of the Federation in the additional revenue shall be adjusted under the Production Sharing Contracts if the price of crude oil at any time exceeds $20 per barrel; and the requirement for a periodic review of provisions in specified time frames.

"It was also observed that some traders lifted crude oil although they were not listed on the approved master list of customers who had a valid contract and were selected through an annual bidding process.

"The Task Force research also found that quite a number of traders did not demonstrate renowned expertise in the business of crude oil trading.

Furthermore, the Task Force found that the use of crude oil traders was contrary to the global trend wherein national oil companies develop their own trading arms, such as the various NNPC trading subsidiaries which currently have limited capacity.

"The Task Force identified various concerns in this area with Nigeria being the world's only major oil producer that sells 100 percent of its crude to private commodities traders, rather than directly to refineries.

"Various submissions to the Task Force demonstrated the potential for lost margins to middlemen, manipulation of pricing, suboptimal returns and market fraud as emanating from this policy and practice.

"A review of NAPIMS's audited financial statements as at 31 December 2009 showed that Joint Venture cash calls payable was N459.568billion.

"Since 2006, government has not allocated enough funds to cover these amounts and NNPC has entered into a range of borrowing arrangements referred to as Alternative Financing Arrangements with the costs of financing this debt (estimated at around 8 per cent) continuously mounting. This cycle will continue to increase in the coming years unless a systemic solution is found".

The report added: "The Task Force found that discretionary decision-making in the award of oil blocks can result in revenue losses for Nigeria. Our review also showed that the management of past bid rounds has resulted in lower demand and fewer qualified bidders, uncompleted deals weakened government returns.

"The DPR provided the task force with information indicating that 67 licenses were awarded between 1 January 2005 and 31 December 201 million unpaid in signature bonuses. For the 7 discretionary allocations reviewed, the Task Force found $183million outstanding and due to the nation's treasury. We were however informed that of the total $749m outstanding in signature bonuses, $321m was legally disputed.

"The Task Force found that $3.027billion was outstanding from the operators for crude oil royalties as at 31 December 2011 per the DPR's records. Of this amount, the DPR had stipulated that ADDAX is liable to pay $1.5billion royalties under the 2003 fiscal regime and there is currently a dispute between Addax and NNPC on the one hand, and the DPR on the other. In the course of the review, the Task Force also encountered differences in records of payments made to the CBN vis-vis DPR records, and lack of independent gas production and sales data.

"The Task Force found that the DPR is currently unable to independently track and measure gas volumes produced and flared and depends largely on the information provided by the operators.

"We also observed that the periodic reconciliation meetings with the operators to address the gas flare volumes were delayed with only 6 completed of 36 at the time of our review".

Meanwhile, a new dimension was added to the leaked report of the task force. Some members of the Task Force denounced the leakage and insisted that its work was yet to be concluded.

Reacting to the leakage, a member, Chief Anthony George Ikoli (SAN), said: "The committee's work assignment is factually yet to be definitively concluded; consequently a final report which would be the culmination of the processes and procedures agreed and adopted by the committee cannot exist, especially not in the format being circulated by the media both social and print."

George-Ikoli, the immediate past Attorney General of Bayelsa State, said that as at the last time that members of the committee met in June, all that happened was that the report writing subcommittee was still doing its job.

He said further: "The report writing subcommittee has not (after our last meeting in June) received, reviewed revised and submitted a preliminary report for the committee of the wholes further consideration.

"The necessary levels and procedures to identify figures, facts and information as well as mandatory authentication and cross checking to ensure information data integrity and credibility cannot be said to have been done or carried out;

"At the last meeting of the committee, a written proposal presented to the committee members was advised to be subjected to the established integral norms and procedures of civilized conduct in a setting such as ours.

"Many members of the committee are just as shocked and annoyed as I am that such painstaking work being conducted by the committee could be so ridiculed by the unsubstantiated reporting of such a respected global news agency. People of unimpeachable character populate this committee; the manner in which this news story was procured only serves to question the integrity of these people, which is rather unfortunate.

"I personally believe the distraction generated by this story is unnecessary as it would neither aid the attainment of the anti-corruption agenda of government or the terms reference of the committee."

Apart from George-Ikoli, there are at least three other prominent lawyers in the task force. They are Chief Olisa Agbakoba (SAN), Chief Anthony Idigbe (SAN) and Olasupo Sasore (SAN) who is also the former Attorney General of Lagos State. Sasore is also the secretary of the task force.

Another member of the committee who did not want to be named said that what members agreed upon at their meeting in June was to send copies of the findings of the task force to persons and institutions concerned for their clarifications and general comment. One of such persons was the Minister of Petroleum, Mrs Diezani Alison-Madueke.

She said the minister and others so concerned were yet to send their response to the task force. "What we agreed upon was to make the response of such people a part of our final report in order to present an objective report to the government. I believe it irresponsible for whoever has done this. It would not help the country in its anti- corruption drive."

Between Presidents Obasanjo,
Yar’Adua and Jonathan ₦16 Trillion was Stolen”-the report said

I imagine the Obasanjo years right?

I can guarantee you that 99.5% of that that sum was looted during Obj's rule.

modicum: Between Presidents Obasanjo,
Yar’Adua and Jonathan ₦16 Trillion was Stolen”-the report said

Read the article again and lets see if you wud still use d word 'stolen' with respect to the said #16trillion...this time read it slowly, Mr Summarizer