By Oscarline Onwuemenyi
Even as the Nigeria Extractive Industries Transparency Initiative, NEITI, embarks on yet another audit of the oil and gas industry, its fourth since the process started in the country, there remain a lot of issues from previous audits that remain unresolved.
After the aw-shucks and alarm moment that greeted the 2006-2008 audit report, for instance, not much has happened by the authorities to dig into the monumental discrepancies that the audit unearthed. Most critical of these issues remain the under-assessment and under-payment by some of the operators in the industry, mainly the Nigerian National Petroleum Corporation, NNPC. This has since become the subject of remediation engagements between NEITI and the NNPC, along with other agencies of government with a stake in government revenue.
One other red flag issue highlighted by the 2006-2008 NEITI audit report was one of non-cooperation by some of companies, including the Nigeria Liquified Natural Gas company, NLNG, and Cavendish and Shebah Exploration and Production Limited. NEITI officials say the companies have been served notices to invoke Section 16 of the Act.
Also, as an Extractive Industries Transparency Initiative, EITI, compliant country, NEITI observed government reports (to the audit) are not based on accounts audited to international standards. To sustain the validation status, government is required to ensure that reports from agencies are based on accounts audited to international standards within a time-bound frame.
Most remarkably, the 2006-2008 audit established that the NNPC owed the Federation for domestic crude the sum of N842.7 billion as at December 31, 2008, which comprised N389.4 billion for domestic crude sales from September 2008 to December 2008. According to the report, this is net of the subsidy which the NNPC withheld during the 2006-2008 period.
The report notes that the procedure for subsidy payments is for the Central Bank of Nigeria (CBN) to make payments through the Petroleum Subsidy Fund (PSF) on the approval of the Accountant-General of the Federation based on the Petroleum Products Pricing Regulatory Agency, PPPRA.
"However, the audit observed that the NNPC deducted the subsidy claims of N816.55 billion directly from the domestic crude proceeds before remitting the balance to the Federation Account," the report stated, adding that there was "no evidence of documentary authority for the deductions was traced by the auditors."
According to remediation reports, NNPC confirmed receiving dividends from the NLNG for 2006-2008, totaling $3.789 billion. However, NNPC did not confirm whether payments were made to the Federation Account.
Meanwhile, audit recalculations of royalty for the years 2006-2008 estimate an under-payment of N2.33 billion arising from subjective interpretation of volume, pricing and API (American Petroleum Institute) grading variable.
Physical Audit Issues
The NEITI 2006-2008 audit further showed that production and lifting data reported by the Department of Petroleum Resources (DPR), other companies (including the NNPC) and terminal operators was inconsistent and therefore could not be fully reconciled.
This prevented a coherent mass balance being presented by the audit. DPR reported 1.2 million barrels less in 2006, 0.08 million barrels more in 2007 and 1.4 million barrels more in 2008, than was reported by the companies.
Vanguard Nigeria
A good process or should i say,they are following due process.