NEITI Vs NNPC on fraud: What Dakouru/NA must do now
By IFEANYI IZEZE
FROM all indications, the sequenced hallowing revelations of large scale fraud and criminal diversions of huge oil revenues by the NNPC and the administrators of Nigeria’s oil economy has become an unending jigsaw puzzle.
Revelations in audit findings by the Hart Group, a United Kingdom-based audit firm for the Nigerian Extractive Industry Transparency Initiative (NEITI) could best be described as a small fraction of the massive diversion of revenues from crude oil sales and fraud that has been going on in the NNPC and all its subsidiary companies including NAPIMS, Calson Bermuda etc since 1999.
The report raised alarm that about 65 million barrels of crude oil could not be accounted for by the Nigerian National Petroleum Corporation (NNPC) between 1999 and 2004. Unknown to NEITI, the case was just one in a plethora of dirty stories of diversion of proceeds from crude oil sales.
Information provided by NNPC on its operations between 1999 and 2002 shows that the nation produced and sold 316,445,301 barrels of crude oil in excess of what OPEC approved for it. It should be noted at this point that the excess production was not in any way criminal as such additional output, were supposed to be for domestic refining as obtainable in other OPEC countries.
OPEC quota is normally shared amongst all the oil producing companies. The portion that was normally captured in the budget was the federation's equity share, which, within the period under consideration, was 58 per cent of the entire crude produced. The oil producing companies took 42 per cent.
In other words, what should have translated into additional revenue to the federation is 183,538,274 barrels (ie, 58 per cent of the total excess of 314,445,301).
At the relevant crude oil price, which at then was an average of $25 per barrel, the nation should have earned additional revenue of $4.5 billion from sales of the excess crude which was supposed to be for domestic refining in the country between 1999 and 2002. At an average exchange rate of $I/Nll1.6, the additional revenue, in naira terms, was about N502.2 billion.
Lamenting the unpatriotic act under a government that has seriously been involved in a campaign for transparency and accountability in money matters, the audit report said: “Considering the fact that this period of 1999 to 2002 was characterized by inadequate implementation of the national budgets as approved by the National Assembly, for the reason of non realization of projected revenue, it therefore behooves on every right-thinking Nigerian to ask the question: what happened? How could we have made so much money in a period due to steadily rising crude prices and quantity, yet we were fed with stories of inadequate revenue.” This particular case represents just one in a plethora of such disgusting stories of fraud that has come to characterize the NNPC and the entire Petroleum Ministry.
On the missing 65 million barrels of crude oil, the report said the missing crude oil was due to shortfalls in the amount of crude oil sent to refineries within 1999 and 2004.
The report had it that in 1999, about 66 million barrels of crude oil was sent by the Crude Oil Marketing Department (COMD) of the NNPC but the nation’s refineries received 99 million leaving a whopping 33 million barrels gap.
The same abracadabra was performed in 2000 when the terminal records given by COMD indicate that 36 million barrels was sent to the refineries while the PPMC in its records acknowledged that it received 46 million barrels within the year, leaving another 10 million barrels gap.
Analysis of the data for the crude transactions between the terminals and refineries however revealed huge deficiencies of 3 million in 2001, 2 million in 2002, 6 million in 2003 and 11 million in 2004, thus bringing the deficiencies during the period under review to 22 million barrels.
“There were differences between the amounts reported within NNPC for the volume of crude sent for refining with the discrepancies between the oil terminals recorded as sent to the refineries and what the refineries recorded as received from the terminals”, the report indicated.
Interestingly, the NNPC till today has not been able to debunk why the refineries in 1999 and 2000 received more crude oil than what was officially sent to them from the terminals and this case has been filed away in the corporation’s archive of very opaque transparent operation.
It would appear that one of the ways the nation was shortchanged by the Ministry of Petroleum Resources through NNPC was by selling crude oil which was meant for domestic refining outside the officially assigned OPEC production quota and diverting the proceeds to escrow accounts other than the Federation's Account. The question that would readily come to mind is: how could it have happened?
Also, NNPC not only supervises the production and sale of crude oil on behalf of the Federation but is equally engaged in production through one of its subsidiary companies, Nigeria Petroleum Development Company (NPDC). The question nobody has ever asked before now is: has the NPDC been producing crude oil from few of its active wells in its acreages especially those around Edo state and some other parts of Niger Delta? If yes, what has been the company’s daily crude production and how has the produced oil been marketed? How is the proceed accounted for since the produced oil, in this case, falls strictly outside the existing joint venture arrangements?
These are questions the newly appointed substantive minister of petroleum should seek clarification from his predecessor, President Olusegun Obasanjo who held forth since 1999 as the sole administrator of the entire Petroleum Ministry as part of the president’s desperate and genuine effort to sanitize the NNPC and rid it of fraud and corruption.
Also, other NNPC's subsidiary companies named Calson ( Bermuda ) Ltd and Duke Oil are deeply involved in oil business especially marketing of crude as any other customer from across the globe but little seems to be known or discussed about these two powerful and active companies.
Calson ( Bermuda ) Ltd. although a subsidiary of NNPC, buys crude oil from NNPC and supplies it with petroleum products. The company which resides in the United Kingdom and assisted in Nigeria by another NNPC subsidiary company named Hyson Nig. Ltd, has over the years been the most potent conduit pipe for siphoning the nation's oil wealth. Calson ( Bermuda ) Ltd and Duke Oil provided the answer to how the excess crude originally meant for domestic refining and even any other for that matter can easily be diverted to international markets without the proceeds hitting the federation account.
As at today, there is no clearly defined process of determining who should lift the federal government’s share of the joint venture produced crude oil. The NNPC department charged with the marketing of the JV allocation has no working manifest of crude oil contract holders, not even haulage contractors.
The question is: If the NNPC (either by design or omission) does not have a working list of their crude oil lifting contractors or consultants, how is the corporation going to know what is being lifted or who is doing the lifting in practical sense?
Also, no such list exists in the Department of Petroleum Resources (DPR), though in issues like this, the department would quickly claim that crude lifting falls outside its mandate (as if it still has any left).
The NNPC assigned Calson Bermuda Limited the responsibility of lifting excess domestic crude allocated to it for local refineries but which could not be refined locally. It should be pointed out here that almost all the local refineries have been moribund since 1999 till date except Port Harcourt that has managed to show some level of epileptic performance. It is therefore not surprising that NNPC that could not refine up to 50 per cent of the 300,000 barrels of crude oil per day single-handedly increased its daily allocation to 445, 000 barrels from April 2001.
That Calson ( Bermuda ) Ltd is a conduit pipe was confirmed in 2000, 2001 and 2002, as indicated in the NEITI audit report. The company's audited financial statements show that it was not reporting the values of crude oil it purchased from NNPC and resold to other buyers. In other words, what NNPC reports as sale to the company is not reflected in the company's records as purchases, and nobody should expect any payment from such company.
Just in 2000, NNPC confirmed that it sold 54 million barrels of crude oil worth $1.473 billion to Calson. Calson in its account confirmed that its purchase of crude oil and petroleum products amount to only $225 million. In 2001, NNPC's records show a sales of 37.5 million barrels of crude worth $878.6 million to Calson. The company claimed its total purchase of crude oil and petroleum products is worth only $227 million.
From the above analysis, it is therefore easy to appreciate how the revenue accruable from production originally meant for domestic refining may have been diverted.
Considering the fact that within the two years of 2000 and 2001, the value of petroleum products supplied by Calson to NNPC is worth $250 million and $205 million respectively, it is therefore crystal clear that NNPC may have diverted crude worth over $2.0 billion between 2000 and 2001 alone.
So Nigerians can begin to imagine what amount of plundering that has happened in the NNPC between 1999 and 2006. The issue now is that Nigerians expect the newly appointed substantive energy minister, Dr Edmund Dakouru to ask questions, if not nothing, to prove his earlier claims that the actual powers to run the petroleum ministry with its parastatal, the NNPC was hijacked by President Olusegun Obasanjo who between 1999 and 2007 acted as the sole administrator of the ministry.
The Honourable Minister should as a matter of urgency and in his usual (before joining politics) transparent ways of doing things re-open debate on the Hart Group - NEITI report which exposed alleged fraud and diversion of oil proceeds by the NNPC and its subsidiary companies.
If the petroleum minister fails to revisit the NNPC scandal either because of his life-giving ties with the Presidency or impotency, then the onus would heavily fall on the National Assembly to transparently re-open the NEITI allegations of gross misappropriation and massive fraud not only in the NNPC but in all the subsidiary companies and the DPR.
This has to be done now to avoid rolling-over into the next government what could be the misdeeds of the present administration in the NNPC, DPR and the entire oil sector because such act represents an unacceptable definition of continuity.
IFEANYI IZEZE, wrote from Finima Bonny Island, Rivers state.