A Review of the Nigerian Energy Industry

‎Nigeria: Govt loses N31.7bn to crude thieves – NEITI

Crude oil theft.
Crude oil theft.

*Demands stoppage of NNPC’s crude oil – product SWAP arrangement

Oscarline Onwuemenyi

20 April 2015, Sweetcrude, Abuja –
The Nigerian Extractive Industries Transparency Initiative (NEITI) has disclosed that billions of naira worth of crude products were stolen by oil thieves in 2012.

NEITI made the disclosure in its latest audit report entitled ‘Financial, Physical and Process Audit: An Independent Report Assessing and Reconciling Financial, Physical and Process Flows within Nigeria’s Oil and Gas Industry – 2012’ where it found that Nigeria lost 2,842,116 barrels per day valued at N1, 960,607,108 to export crude theft and sabotage. Within the same period, Nigeria also lost around N31,771,108,795 to the activities of pipeline thieves and vandals.

The report panned the Nigerian National Petroleum Corporation, NNPC, which acts as agent to and sells crude oil on behalf of the Federation. NNPC is also customer for Nigeria crude oil and sells crude oil for domestic refining to itself through one of its subsidiaries – Petroleum Products Marketing Company (PPMC.) It noted that whereas there are executed Sales and Purchase Agreement (SPAs) between NNPC and other crude oil customers, there is no contract in place for the crude oil sales to NNPC-PPMC for domestic use.

The report also found that despite many years of active gas production in the country, the Department of Petroleum Resources (DPR) could not provide any data on gas production or gas stock data due to some inherent difficulties associated with gas production and storage, coupled with the lack of proper equipment to handle such problems, pointing out that maintenance of accurate gas production and stock figures may only be attainable in the future.

The NEITI audit 2012 also discovered that there were no bid rounds in the period covering 2012 under review, saying the examination of the Central Bank of Nigeria (CBN) statements and DPR records did not reveal any payment of Signature Bonus during the period under review. It added that domestic crude oil losses reported by PPMC in its populated templates were 3,045,625 barrels per day with an estimated value of USD$304,562,474.00 in 2012.

According to an executive summary of the report, “The losses are very significant. A few of the companies given approval (out of the 46 marketers) to import PMS in 2012 performed below average while four of them did not import any petroleum products.”

It added that, “The four marketers should be appropriately penalised and blacklisted from future participation in the import process if confirmed to have received foreign exchange for product importation without supplying the products. PPPRA should further also review the future participation of the companies that performed poorly.”

The report further recommended that the NNPC should discontinue the Crude Oil – Product SWAP arrangements and concentrate on direct importation of refined products, pointing out that that just as similar to the last audit report, the SWAP transactions also resulted in a net loss/ under-delivery of $500,075,239.29 or N78,761,850,188.18.

“The alternative arrangements with the balance of 78.49 per cent domestic crude allocation are not beneficial to Nigeria as shown in the analysis of Alternative Product Importation Arrangements and also corroborated in the Review of Federation Equity Crude Section of this report.

“The alternative arrangements should therefore be abolished forthwith while government should export the percentage of crude oil that is unrefined locally and purchase refined products,” it added.

It revealed that the quantity of domestic crude oil allocation processed by the refineries remains low (21.51 per cent) as was recorded in the previous audit cycle where an average of 20 per cent processing was achieved by the refineries over a period of three years (2009-2011). In 2012 out of a total allocation of 162.343 million barrels, only 34.927 million barrels was processed in the country.

The report noted that the crude allocation to the NNPC for the refineries should be limited to their current capacity utilisation.

It called on the Federal Government through the appropriate agency to set the agenda for the privatisation of the refineries especially with the poor performance of the old and moribund Port Harcourt Refinery.

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