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51 companies owe FG N1.32 trillion, $2bn lost to crude oil theft in 1 year – NEITI

How Nigeria can tame massive crude theft

Fifty one (51) companies in the oil and gas sector are indebted to the federal government to the tune of N1.32 trillion ($3.17billion).

This is as federal government revenue from the industry dipped by 40 percent during the year 2020 with over $2 billion lost to crude oil theft and vandalism during the same period.

In 2019 the total amount owed FG was N2.6trillion while the number of defaulting companies were 77 The collectable revenues are due to be paid to the Federation through the Department of Petroleum Resources and the Federal Inland Revenue Service and include royalty oil, royalty gas, concession rentals, Petroleum Profit Tax, Company Income Tax, Education tax, Value Added Tax, Withholding Tax among others.

These facts were contained in NEITI 2020 oil and gas industry report made public in Abuja on Monday 7th March, 2022 by the Executive secretary Nigeria Extractive industries transparency Initiative ((NEITI) Orji Ogbonnaya Orji. Other reports were Solid Minerals Report as well as Fiscal Allocation and Statutory Disbursement report

Between 2003 and date, NEITI has produced 13 cycles of oil and gas industry reports, 11 cycles of solid minerals and 3 cycles of Fiscal Allocation and statutory disbursement audit reports.

The current report reconciled payments from eighty-three (83) entities. They included sixty nine (69) oil and gas companies, thirteen government agencies and the Nigerian Liquefied Natural Gas (NLNG).

According to Orji “the courageous public disclosure of companies’ liabilities to the Federation by NEITI was in line with its national mandate and in fulfilment 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 the 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 described the companies as the backbone of the industry stressing that “without the companies there will be no industry, no investments and no revenues to remit”.

Read also: Energy giant Shell withdraws from Russian oil

The NEITI 2020 oil and gas report also revealed that Nigeria earned $20.43billion from the oil and gas sector in 2020 representing a decline of 40% compared to the 34.22billion realized from the sector in 2019.

On remittances to the Federation Account from the oil and gas sector, the report also disclosed that $14.65Billion, representing 71.17% of the total earnings in 2020, was remitted to the account, while total aggregate financial flows from the oil and gas sector to government in ten years (2011-2020) was $394.029 billion.

Total crude oil production in 2020 was 646.7mmbbls, representing a 12% decrease when compared to the 735.24 mmbbls produced in 2019. Out of the total production in 2020, 648.48mmbbls were lifted, and this was 11.85% lower than the 735.66mmbbls lifted in 2019.

On domestic crude allocation and consumption, 107.746mmbls was managed by the NNPC under the Direct Sale Direct Purchase arrangement. It also revealed that the value of the crude exchanged under the DSDP arrangement was $6.7billion, while the value of the refined products received for local consumption was $6.03billion, indicating a variance of $134.78million.

In the area of fuel subsidy, the NEITI report further disclosed that NGN 106.9 billion was paid as subsidy between January and June 2020 to sustain product availability with an outstanding balance of N26.74 billion yet to be paid.

NEITI also reported that 20.01billion litres of petrol, 52 million litres of kerosene and 5.33 billion litres of diesel were respectively imported into the country for domestic use during the period under review.

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, 39.16mmbls 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 gas sub-sector contributed over $1.5billion to the Federation account while the total gas production in 2020 was 3.01million cubic feet. Whereas 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% (N9.44 trillion) of the total export value of N12.52 trillion.

The report made far reaching recommendations including the urgent need for further investigations into the circumstances surrounding the transfer of the Federation’s stake in OML 24 operated by Pan Ocean and New Cross Energy. NEITI’s concern is on the value for money of the transaction, payment for the federation equity interest and recovery of the $309.1million that should have been paid for the asset.

The agency praised the enactment of the Petroleum Industry Act and the prompt decision of President Buhari to set up a nine-member committee, including NEITI, to oversee its implementation adding that the courageous implementation of the reports of the Steering Committee when concluded will set the stage for a new oil and gas industry ready for competition and investment going forward.

Although the agency unveiled three reports, it however failed to make public details of the reports for the solid minerals sector and the fiscal allocation and statutory disbursements.