A Review of the Nigerian Energy Industry

Group demands limitation of crude allocation to NNPC refineries


08 August 2015 – A civil society group, Civil Society Legislative Advocacy Centre (CISLAC), on Thursday asked the Federal Government to ensure that domestic crude oil allocation for local refining was limited strictly to the refineries’ refining capacities.

Executive Director of CISLAC, Auwal Rafsanjani, said this was necessary in view of the abuses of the allocation over the years by the Nigerian National Petroleum Corporation (NNPC).

The latest report by the Natural Resource Governance Institute (NRGI), a coalition of private sector and international institutions committed to the promotion of accountable and effective governance in the extractive industries, revealed that about $32 billion worth of domestic crude oil allocation (DCA) between 2011 and 2013 was mismanaged.

Out of a total DCA of 435,106 barrels per day (bpd) valued at $17.8 billion, the report said only about $9.8 billion revenue, or 55 percent, reached the Federation Account in 2013.

With the country’s refineries in Port Harcourt, Warri and Kaduna gradually coming back to production, Mr. Rafsanjani said it is important to curb the corruption and waste by ensuring that DCA was restricted to only the exact refining capacity of the refineries.

This was part of recommendations by CISLAC to the Federal Government on how to restructure the operations of the NNPC to achieve greater productivity and efficiency in the oil industry.

Other recommendations, which followed a review of recent developments in the oil industry, included direct stoppage of all existing offshore processing agreements (OPAs) and institution of a competitive and open process of refined products exchange agreements.

The group also urged the NNPC to design a crude sales system that would eliminate the use of multiple unqualified middlemen and companies to operate in the sector; direct the publication of annual reports and regular reports to relevant agencies.

To ensure that the commercial function of the NNPC was separated from its regulatory role, the group urged government to amend the NNPC Act and unbundle its operations, to make it more efficient and accountable.

Mr. Rafsanjani urged government to be decisive on the fuel subsidy issue, saying steps must be taken to recover all subsidy payments fraudulently claimed.

On crude oil theft, CISLAC wants government to ensure that statutory institutions, like the Nigeria Maritime Administration and Safety Agency (NIMASA) do their jobs, by strictly enforcing ship registration, while the Nigeria Ports Authority (NPA) must enforce the ship-to-ship transfer regulations.

The group bemoaned the huge revenue losses through oil theft, saying government must also strengthen vessel clearance practices around oil installations and enforce the rule to arrest ships with their Automatic Identification Systems (AIS) transponders switched off.

“The government should also institutionalise the practice of publishing the names of suspect ships and updating it regularly to serve as deterrent,” the group said.

“Government should install independent metering facilities to ensure real-time measurement of crude production, transmission and export to prevent rogue oil firms from exploiting the current system to perpetrate oil theft.”

On Nigeria’s Extractive Industries Transparency Initiative (EITI) revalidation exercise slated for January 2016, Mr. Rafsanjani allayed fears that the international transparency agency may sanction Nigeria if the sacked National Stakeholders Working Group (NSWG) was not reinstated.

He said what should concern Nigerians should be the call on government to expedite action on the formation of a Board made up of competent, credible and passionate persons without partisan leanings and other considerations outside the NEITI Act 2007.

When the Board is reconstituted, CISLAC said it must make the implementation of the recommendations in the NEITI Audit reports its primary priority, pointing out that the bulk of the rot in the sector would have been drastically reduced if this was the practice since 2005.

“The implementation of the NEITI audit reports was one of the campaign promises of the president. He should therefore re-constitute the NEITI Board with that in mind,” he said.

The government, he said, should also incorporate the outstanding elements of the new EITI Standards to raise the level of transparency and accountability in the sector, particularly in bidding for licenses and publication of oil production contracts and their beneficiaries.
*Bassey Udo – Premium Times

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