Report on a pilot study that focuses exclusively and extensively on the sale of Nigeria’s share of crude oil and gas produced in 2017 has been released today in Abuja by the Nigeria Extractive Industries Transparency Initiative (NEITI).
The 136-page report contains a treasure trove of information including breakdown and analysis of oil and gas production in 2017. It also disaggregated the federation share of production by types, allocation, uses, details of the revenues derived from the sales, the receiving accounts, and allocation of the revenues.
The report also contains details of the buyers’ selection process, the names of buyers/traders of Nigeria’s crude, destinations of the crude, the vessels details, bill of laden dates, pricing options, sale prices and actual payments, payment dates, products supplied by type, cargo, supplier, supply date, volume, unit cost, demurrage etc.
While releasing the Report titled “pilot study on commodity trading for 2017” the Executive Secretary of NEITI, Mr. Waziri Adio stated that the special report was undertaken in furtherance of the recent decision of the global Extractive Industries Transparency Initiative (EITI) to add commodity trading transparency to its scope of coverage through stand-alone and in-depth reports. The objective, Mr. Adio stressed, was to ensure adequate returns to governments, increasing competition and efficiency in commodity trading, and ensuring greater public scrutiny of the resultant revenues.
The NEITI Executive Secretary further stated that, “Resource-rich countries receive shares of minerals produced in their territories as equity shares or as in-kind payments, and these minerals are usually sold directly or indirectly to commodity traders through state-owned enterprises. However, the process and details of these sales are mostly shrouded in secrecy, even when more than half of the revenues from the extractive sector come from these sales. This is why the EITI resolved to beam more search-light on commodity trading. Nigeria is one of the five EITI-implementing countries selected to pilot this enhanced focus”.
From the report, the total crude oil production for 2017 was 692 million barrels. Out of this volume, the share that went to the federation was 240.9 million barrels representing 35% of the total crude oil production for the year 2017. A trend analysis for the year under review shows that the 2017 federation share was 4% higher than the 231.6 million barrels in the same category for 2016 but was 19% lower than the 297.8 million barrels for 2015. This shows that while there was a slight improvement on the figure for 2016 (a year characterized by vandalism and sabotage of oil facilities), crude production for 2017 was about a fifth less than the 2015 level.
A further breakdown of key findings in the report show that 240.9 million barrels federation share for 2017 was disaggregated as follows:
- Domestic Crude Allocation (DCA): 105. 9 million barrels or 44% of federation share;
- FIRS Liftings: 57.3 million barrels or 24% of federation share;
- Federation Export: 50. 2 million barrels or 21% of federation share;
- Third Party Financing: 17.6 million or 7% of federation share;
- DPR liftings: 9.9 million barrels or 4% of federation share.
- In turn, the 105.9 million barrels for Domestic Crude Allocation (DCA), the crude assigned for local supply of refined products, was further allocated as follows:
- Direct Sale Direct Purchase (DSDP): 72. 8 million barrels or 69% of DCA;
- Refineries: 26. 5 million barrels or 25% of DCA;
- Product Exchange: 4.7 million barrels or 4% of DCA;
- Export (unutilized portion of DCA): 1.9 million barrels or 2% of DCA.
- The total revenue from sale of federation share of oil and gas for 2017 was $14.5 billion—$13.18 billion or 90.8% from crude oil and $1.32 billion or 9.1% from gas.
- NNPC deducted N297 billion from earnings from the Domestic Crude Allocation as costs and losses, broken down as follows:
- N25 billion for crude and product losses;
- Sum of N77.92 billion was under-remitted by NNPC to the Federation Account from Domestic Crude Allocation in 2017. NNPC acknowledges the under-remittance and states that there is an ongoing reconciliation to net off the N77.92 billion from “the established Federation indebtedness to the Corporation of N797bn arising arising from KPMG Forensic audit of the Corporation at the instance of the Federation.”
- The pilot report shows that the federation crude went to 29 destinations in 2017. The top-five destinations were: India with 41.3 million barrels (17.12%); USA, 30.6 million (12.72%); local refineries, 26.5 million barrels (10.98%); Netherlands, 22.9 million barrels (9.5%); and Spain, 21 million barrels (8.83%).
- There were 60 individual and consortiums of buyers of federation’s crude in 2017. The top five buyers were:
- Duke Oil Company, the trading arm of NNPC, which lifted 29.3m barrels or 12.16%;
- TOTSA/Total oil Trading, which lifted 18.4m barrels or 7.67%;
- Port Harcourt Refinery which lifted 18m barrels or 7.49%;
- SIR/Sahara Energy Resources which lifted 15.2m barrels or 6.32%;
- And LITASCO SA/MRS Oil and Gas which lifted 10.5m or 4.38%.
The pilot study however clarified that the report does not cover other revenue streams from the sector such as Petroleum Profit Tax (PPT), royalties, signature bonuses, dividends, penalties and fees, statutory payments etc. The Executive Secretary added that other details on production and processes will be in the 2017 NEITI oil and gas industry report which is scheduled for release soon.
The study conducted by BDO, an international auditing and advisory firm covered four government agencies and 73 companies. The 73 companies included the following: six bilateral companies, 13 international trading companies, four trading arms of international oil companies, 25 Nigerian trading companies, two NNPC trading companies, nine refineries, and 14 DSDP contractors.
The report contained lessons learned from the pilot and recommendations on how to improve subsequent exercises, especially in terms of adherence to audit data assurance processes and compliance by trading companies in filling out templates to ensure reconciliation with data from Nigeria’s state-owned enterprise, NNPC.
Apart from the pilot studies, EITI has convened a global working group on commodity trading transparency, comprising representatives of trading companies, governments, state-owned enterprises, academics, donors and civil society groups.