A Review of the Nigerian Energy Industry

Nigeria spends N612bn on JV operators —NEITI report

An oil worker inspecting a valve on a flow line.
An oil worker inspecting a valve on a flow line.

28 April 2015, Lagos – The Federal Government, through the Nigerian National Petroleum Corporation, NNPC and the National Petroleum Investment and Management Services, NAPIMS, spent N612 billion, while it paid $3.1 billion as cash calls for its joint venture operations, according to the 2012 audit report of the nation’s oil and gas industry just released by the Nigeria Extractive Industries Transparency Initiative, NEITI.

The report stated that there was an increase of N196.356 billion in Naira cash calls paid in 2012 compared to 2011. This is an increase of 47.14 per cent, while there was an increase of $506.697 million in Dollar cash call payments in 2012 when compared to the figure for 2011, indicating an increase of 19.47 percent.

The increases in cash call payments (Naira and Dollar) in 2012 was said to be attributable to increased Joint Venture operations (especially in SHELL and EXONMOBIL JVs) and payment of cash call arrears.

A breakdown of the Naira cash calls to JV operators shows that the highest amount, N157.1 billion was paid to Shell Petroleum Development Corporation, SPDC, Total Exploration and Production Nigeria Limited, TEPNG and Nigerian Agip Oil Company, NAOC, joint venture, followed by the NNPC/Chevron, JV, which gulped N115.7 billion.

NNPC/EXXONMOBIL, NNPC/TEPNG and NNPC/NAOC/PHILIPS JVs got cash calls of N101.5 billion, N68.5 billion and N67.6 billion respectively, while NNPC/POOC, NDPC/SDPC and NDPC/CNL JVs were given cash calls of N12.6 billion, N1.2 billion and N367 billion respectively.

Also, prior cash calls paid by NNPC to JV operators within the period under review amounted to N81 billion, while credit transfer to OB3 gas pipeline was N6.9 billion.

For the dollar cash calls, NNPC/SPDC/TEPNG/NAC, Joint Venture got the highest, which was $836.2 million, followed by NNPC/Chevron, $634 million, NNPC/EXXONMOBIL, $503.7 million, NNPC/TEPNG, NNPC/NAOC/PHILIPS, NNPC/POOC, NDPC/SPDC and NDPC/CNL got cash calls of $458.6 million, $276.6 million, $115.7 million, $1.3 million and $1 million respectively.

Within the year under review, prior cash call paid was $281.6 million. According to the NEITI report, other specific financial flows in 2012 increased by two percent from $25.136 billion in 2011 to $25.712 billion.

There was an increase of 61 percent in company income tax (CIT), from $273.481 million in 2011 to $441.048 million in 2012.

The huge increase was said to be partly due to CIT payment relating to 2011 in the sum of $127.506 million paid by SPDC in 2012.

The SPDC payment represents 28.91 percent of the total CIT payments in 2012. The Financial Flows in the form of loan repayments and dividend from NLNG in 2012 was $2.796 billion, up by 10 percent from the 2011 figure of $2.538 billion.

Also, Pay As you Earn (PAYE) tax flows was said to have increased by 570 percent, from $13.120 million in 2011 to $87.918 million in 2012. This is due to the amendment of the Personal Income Tax Act (PITA) 2011 which significantly increased the tax rates.

Conversely, PAYE to States declined by 66 percent during the same period.
*Sebastine Obasi – Vanguard

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