Another Augean Stable

[Mirror]

The Nigerian Extractive Industries Transparency Initiatives (NEITI) and Petroleum Products Pricing Regulatory Agency (PPPRA), bicker over an audit report that exposes the rots in the oil and gas sector of the economy

There appears to be no immediate end to the raging controversy and war of words between the Nigerian Extractive Industries Transparency Initiatives (NEITI) and Petroleum Products Pricing Regulatory Agency (PPPRA), over the former's recent release of the 2009-2011 oil and gas physical and process audit report.

The current altercation between NEITI and PPPRA, described both interesting and revealing by stakeholders in the oil and gas sector and other keen watchers of the Nigerian economy, has further raised concern about the desire of government to fully stem the tide of corruption that is particularly prevalent in the sector.

The NEITI's new audit report which indicted the Nigerian National Petroleum Corporation (NNPC) and PPPRA over non remittance of N280.173 bn to the federation account, according to analysts, is a mere continuation of an already endemic corrupt tendency that has been the cornerstone of the oil and gas sub-sector in the time past.

Chairman of NEITI, Ledum Mittee, had at a public presentation of the report in Abuja, said that fi ndings made by the new audit indicated that N8.173 bn being over-recovery collected from some marketers was yet to be remitted to the federation account by the NNPC and two other companies.

The report also revealed that there was a revenue loss of over $1.7 bn following non renewal of MoU between Joint Venture companies and NNPC which made the JVs to transact business with MoU which had expired since 2008, all amounting to about N280.173 bn.

"The amount of N4.423 bn being over-recovery collected from some marketers is yet to be remitted to the federation account while NNPC and two other companies are yet to refund N3.715 bn being over-recovery for the period under review. The audit report also revealed revenue loss by federal government of over $1.7 bn following non renewal of MoU between Joint Venture companies and NNPC which made the JVs to transact business with MoU which had expired since 2008." Mitee said.

Mittee said that NEITI also discovered a lingering worrisome situation where there is no agreed pricing methodology between NNPC and the companies for the determination of fi scal values for royalty and PPT computations.

The NEITI audit report seems to have corroborated the Chairman, Senate joint Committee on Petroleum (Downstream), Appropriation and Finance, Senator Magnus Ibe's earlier claim that some powerful players in the petroleum sector allegedly shared over N3.655 trillion between 2006 and September2011 in pursuit of importation of refi ned petroleum products.

However, since NEITI made its latest audit report public, there have been claims and counter claims with PPPRA challenging the veracity of the report.

In fact, PPPRA accused NEITI of confusing the public with its audit report saying the latter appeared to have embarked on a wild-goose chase instead of addressing the issues at stake. The NEITI audit report had recommended that the PPPRA should remit N4.423 billion arising from over-recovery collected from

Executive Secretary of the PPPRA, Reginald Stanley, said, "We challenge NEITI to tell Nigerians where the N4.423 billion it claims was warehoused. If NEITI is indeed desirous of effi ciently doing its job, we challenge it to go and consult the records at the Central Bank of Nigeria, where the Petroleum Support Fund account is domiciled.

"It should also go a step further by examining the records at the Federal Ministry of Finance to confi rm if certain amount of money, as claimed, was remitted accordingly or not by the PPPRA. To all intents and purposes, it is apparent that NEITI is on a wild-goose chase and is self-seeking in its putrid claims."

Stanley also faulted NEITI's claim that all the companies and government agencies covered by the audit, including the PPPRA, were fully involved and participated actively in the audit process.

He said there was never a time the audit report was signed off by the PPPRA management and challenged NEITI to make a copy of the report where it signed off available to the public to prove its claim.

The PPPRA boss cited a section of the NEITI report that claimed that N3.715 bn had yet to be refunded by the Nigerian National Petroleum Corporation and two other marketers, NIPCO Plc and AMG Petro-Energy Limited.

He said the report was incongruous with the realities of what was outstanding in the over-recovery, which was N3.98 bn, owed only by the NNPC.

However, NEITI, on its part, has continued to affi rm the authenticity of its recent audit report. It stated that all the companies and government agencies covered by the independent audit including PPPRA were fully involved and participated actively in the audit process from conception and design of the audit templates, through to the population of the templates with information and data to the stage of data and information, reconciliation and validation exercise.

NEITI's Director of Communication, Orji Ogbonnaya Orji, said in Abuja, that the process also afforded all the companies and agencies including the PPPRA an opportunity to "sign off" the report before it was published and made available for Nigerians to see. "We do not understand what PPPRA meant by 'secondary data.' We doubt if the Executive Secretary of PPPRA received adequate briefing from his team who worked directly with NEITI on the project," Orji had said, adding that the time has come for an important agency like the PPPRA to develop time and interest to ensure that its management understand how NEITI/EITI process works.

"The NEITI Secretariat is already providing this enlightenment to the management and staff in other agencies and companies covered by NEITI mandate. This enlightenment is necessary for shared-learning and exchange of ideas to build common understanding and knowledge of the process and benefi ts with a view to reducing inter-agency friction," Orji noted.

He, therefore, informed that the NEITI audit process was unique from every other usual audit that PPPRA may be used to, insisting that it was usually based on information and data voluntarily but mandatorily obtained from concerned agencies.

"For the avoidance of doubt, NEITI audit process is simpler, uniquely different from the usual audit that the Executive Secretary of PPPRA is used to. The audit report is based on information and data primarily, voluntarily but mandatorily provided to NEITI by PPPRA during the audit exercise. NEITI under the EITI global principles and standards does not manufacture either information or data. Our audit process is built strongly on factual data, integrity and openness because it is both covered entities and multistakeholders- driven. Therefore the credibility of our report remains solid and one that can be taken to the bank," Orji stressed.

However, despite the misgivings being expressed by PPPRA, the Finance Minister and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala had expressed delight over the audit report saying it would afford government the opportunity to recover the much needed funds for the development of the country.

She said all the agencies would have to sit down and agree on the report and work together towards recovering the funds. "We are happy because we are looking for any additional money that the ministry can collect. It is not just the ministry alone; we need all the agencies involved. You can see that it is the oil and gas sector, we will be glad to sit down with our colleagues in NNPC, Ministry of Petroleum Resources, the oil sector, multi nationals, the mines and steel ministry everybody is involved. You have to sit people down so that they agree the audit is good. And the analysis is yielding good information and then we all work on it together," she said.

Managing Director and Chief Executive Offi cer, Financial Derivatives Company Ltd, Bismack Riwane, said transparency and accountability are the only ways of curbing oil theft and pipeline leakage to stop the damage it is doing to the Nigerian economy.

He added that the about 400,000 barrels of oil per day which the country loses implies that the country is losing more than $11 billion a year, a huge sum which he said can be used to address the country's teething infrastructure challenge. "Every barrel of oil equals 350 litres, so oil theft is not a hidden business and it cannot be done without connivance from government offi cials, "he said.

Rewane said "if we don't talk about it then we can't deal with it as a country. There has to be greater accountability and people have to be held responsible, national security issues should be at the fore front of the country's plans".

He described the oil theft situation in Nigeria as a crisis that needs to be arrested and earnings should be invested in making the lives of people better.

Evidently, the oil and gas sector, the mainstay of Nigeria's economy is no doubt undergoing challenges from numerous fronts, from the unfolding dynamics in the global oil market, through the unbridled oil theft and pipeline vandalism to alleged cabals believed to be collaborating with some people in government.

Obviously, there is growing concern about the fate of economies of countries, which depend on oil revenue for sustenance including Nigeria.

At the recent OPEC meeting, the Petroleum Minister, Diezani Alison-Madueke, while expressing confi dent that that Asia remains alternate market admitted that there "is a concern over the new global trend in the sector.

Most recently, in response to rising cost of crude, interest in shale oil utilisation has been renewed. Shale deposit in the United States, which started like a fairy tale, is driving the country's breakthrough in energy suffi ciency, with a global energy strategist, Dr. Kent Moors, predicting that it may not be lifting a barrel of crude from the international market by 2050.

At least, US' medium-term plan is to achieve self-suffi – ciency, while President Barack Obama, in the past few years, stepped up campaign towards achieving key production targets, just as the country has, in earnest, started cutting down on importation. Its production has risen to a 21-year-high as a new combination of technologies has unlocked large deposits previously trapped in shale rock in North Dakota and Texas.

US mastery of hydraulic fracking (or fracturing) and horizontal drilling techniques has led to a slump in energy imports from some OPEC nations, most notably those in Africa, which typically produce lighter grades of oil similar to that of the North America. US crude production jumped 20 per cent in a year to 7.37 million barrels a day in early May, the highest level since 1992, said the country's Energy Information Administration data.

Consequent upon increase in production, exports from three of OPEC's African members — Nigeria, Algeria and Angola — to the US have fallen to their lowest level in decades, dropping by 41 per cent in 2012, as established by the US Department of Energy.

While shale supply threatens to sap the demand for crude, the minister said the country must, most importantly, "look inward and create alternate markets" in Africa.

On the implications of the development, offi cial of NNPC who did not want his name mentioned, told our correspondent at the weekend that the situation posed a great concern, not just to Nigeria, but also to other African nations exporting crude oil.

"We (Nigeria) risk a situation where they (US) can even go into territories that we are currently supplying. And the fear exists that if America is going to offer to sell oil to some countries, even at a marginally higher price, the countries are likely to accept it more than Nigeria. We risk a situation where, in the fi rst place, we will lose our market in America. But beyond that, we also risk a situation where America, having satisfi ed itself with what it has, will also want to fi nd a market outside. And that market may also be a market that Nigeria is selling to," the source said.

Early this month, a report by the Energy Information Administration, the Energy Department's statistical arm of the US government, showed that domestic crude oil production exceeded imports for the fi rst time in 16 years. The EIA data indicated that imports to the US from Nigeria tumbled to a record low in February, going back to 1995.

Alison-Madueke, had stated that a committee set up by the Organisation of Petroleum Exporting Countries had initiated a study into shale and would consider the effect of shale oil on the global market for OPEC crude "in the not-too-distant future."

The sources had explained that the increased production of shale oil in the US had particularly affected imports from Africa, which typically produce lighter grades of oil similar to the North American blends.

He added that with the volatility in Nigeria's oil production, many countries might want to go into agreements with the US on crude oil supply. "The reason is because they know that if they go into agreement with America, the chances of the oil companies there declaring force majeure is very slim, and they are assured of guaranteed supply with more fl exibility," he said.

National Mirror