Nigeria loses N260b to crude for product swap

The Nigeria Extractive Industries Transparency Initiative (NEITI) 2015 Oil and Gas Industry Audit Report, showed that the country recorded a net loss of $723 million (N260 billion) from getting refined products through Offshore Processing Arrangement (OPA) in 2015.
 
Besides, the agency said that sum of N317 billion which is the value of crude allocated for domestic consumption by the Nigerian National Petroleum Corporation (NNPC), was yet to be reconciled.
 
According to NIEIT in the report released at the weekend, this means that the value of refined products that the country received through OPA was less than the value of the crude given by $723 million, even after allowances had been made for costs and margins.
 
NEITI noted that the President Muhammadu Buhari administration cancelled the OPA in November 2015 for being uneconomical. “However, there was an outstanding liability of $498 million by companies contracted under OPA from under-delivery of imported product, he added.
 
The report showed that $90 million was lost through a practice where NNPC used a revised/lower pricing option at the point of payment instead of the higher price at the point of purchase.
 
The report states that NNPC has stopped the practice of double valuation with the coming of the present administration.
 
NEITI therefore recommended close monitoring of the Direct Sale Direct Purchase (DSDP) arrangement that replaced the OPA to ensure the country is not being shortchanged.
 
It also called for government to recover the $498 million OPA liabilities from the affected companies.
 
Dwelling on the un-reconciled crude oil allocation to domestic refineries by NNPC, NEITI explained: “The 153.92 million barrels of crude allocated for domestic consumption (at 445, 000 barrels per day) was utilised as follows: 56.11 million barrels or 37% to PPMC for export; 89 million barrels or 57% for Offshore Processing Arrangement (OPA) and 8.74 million barrels or 5.6% for local refineries. The total value of the domestic allocation came to $7.77 billion or N1.5 trillion.
 
“When combined with the closing balance for the previous year and with allowance made for liability acknowledged and upfront deductions by NNPC, there was an un-reconciled sum of N317 billion from the value of crude allocated for domestic consumption. NNPC acknowledges having a liability of N418 billion as at 31st December 2015. Also, NNPC deducted the following upfront from domestic crude account: N60.9 billion for losses; N316.7 billion for subsidy; and N112 billion for repairs and maintenance.
 
“A breakdown of the repairs and maintenance expenses shows that N24.2 billion was spent on crude movements; N22.1 billion on fund releases for salaries; N15.6 billion on demurrage; N13.2 billion on share of upfront; N11.37 billion on product distribution; N10.5 billion on through/marine; N4.12 billion on facility repairs; N3.27 billion on operations; N1.9 billion on security; and N1.3 billion on projects, among others.
 
NEITI recommends that upfront deductions should be discontinued and that NNPC should settle its liabilities and reconcile the un-reconciled amount. NEITI also recommends that detailed records of losses and repairs be kept to ensure transparency and accountability.
 
Speaking on the report, the Executive Secretary of NEITI, Waziri Adio said that beyond providing a snapshot of what transpired in 2015, the report revealed money to be recovered, leakages to be blocked, and urgent reforms to be undertaken.
Source: 
Guardian