• Thursday, June 20, 2024
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NEITI indicts NNPC, wants it probed over NLNG funds diversion, subsidy payments

For bribing NNPC officials, others, US keeps Glencore $1.2bn fine

The Nigeria Extractive Industries Transparency Initiative (NEITI) has accused the Nigerian National Petroleum Corporation (NNPC) of funds diversion with a call for the company to be probed over its handling of dividends received on behalf of the federation from the Nigeria Liquefied Natural Gas (NLNG) in 2020.

NEITI also accused the corporation of mismanaging payments for fuel subsidy and other sundry funds with a suggestion of zero allocation to the nation’s refineries due to their “lack of capacity to process refined products.”

In its 2020 oil and gas report released on Monday in Abuja by the Executive Secretary Orji Ogbonnaya Orji, the oil and gas industry watchdog said NLNG dividend and other related payments remains an issue as payments are being warehoused in NNPC designated bank accounts and not Federation Account.

It advised the NNPC management to “transparently disclose and account for NLNG payments in the corporation’s financial statements while future dividends should be paid to the federal government as the investor.”

In the words of the Executive Secretary, “the courageous public disclosure of companies’ liabilities to the Federation by NEITI was in line with its national mandate and in fulfillment of its obligation as a member of the global Extractive Industries Transparency Initiative (EITI), and not in any way against the companies.

”NEITI’s disclosure seeks to draw the attention of the oil and gas companies to their obligations to remit all revenues due to government, especially at this time that government is in dire need of revenues to rebuild the nation’s infrastructure and improve the investment climate in the country”, he said.

On the state of the refineries in the country and the huge amount spent yearly to maintain them and pay workers’ salaries for doing nothing and contributing nothing to the economy, NEITI advised the federal government to stop allocating funds to the moribund refineries and fully deregulate the downstream sector while savings made from the removal of subsidy regime should be used to improve the lives of the citizens.

Read also: Global LNG market trends for 2022

NEITI also picked holes with the subsidy payments made by the NNPC totaling N106.9billion between January and June 2020.

According to the report, a total of1.799m mbbls crude oil (valued at US$59.225million and US$2.847m mbbls crude oil valued at US$116.980million was lifted from OML (Okono fields) and sold for pre-export financing and project eagle agreement. The amounts it said were for repayment of loans taken in the past to settle marketers under the petroleum subsidy scheme which were being recovered from monthly federation revenue proceeds.

However, the circumstances under which the subsidies were incurred and the beneficiaries were unclear, the report stated.

Furthermore, the report accused NNPC of engaging in under recoveries and value loss. It stated that the total amount of subsidy claim by NNPC in 2020 was N133.74 billion ( about $375.22million), out of which N106.99billion ( $300.19million) was recovered from the federation in 2020, leaving an outstanding balance of N26.74billion ($75.03million) to be recovered from the federation in 2021 through budgetary provision. Unfortunately, the report said there was no independent validation of these figures.

NEITI therefore urged the NNPC to transparently disclose details of the subsidy and the beneficiaries of the payments in addition to rendering accounts on the loan transactions.

On the operatorship of OML 116, the report said although it was reported to have been transferred to NPDC, the proceeds from the production was treated as if the ownership of the license was reassigned to NPDC whereas there was no consideration paid to show that it was reassigned.

On oil theft and crude losses, the report made an assessment based on the data provided to NEITI by 22 of the 69 covered companies. According to the result of the assessment, 39.16m mbls of crude valued at US$44.73million (N15.71billion) was stolen with 349 cases of pipeline vandalism recorded in 2020. This is an improvement when compared to the 1,387 cases of vandalism reported in 2019.

On gas production, the report revealed that the gas sub-sector contributed over $1.5billion to the Federation account. According to the report, the total gas production in 2020 was 3.01million cubic feet. While 64% of this total quantity was sold, 8% was flared and 4% unaccounted for.

The NEITI report also showed that the oil and gas sector contributed only 8.16% to the total GDP in 2020. This represents a decline of 0.46% when compared to the 8.62% recorded in 2019. The report further revealed that the sector dominated the country’s export in 2020, contributing about 75% (N9.44trillion) of the total export value of N 12.52 trillion.

To curtail crude oil losses, NEITI advised NNPC to ensure proper pipeline security surveillance using satellite imagery and other sophisticated ICT tools to ensure real time monitoring and decisive actions on pipeline vandalism.