NNPC made profit from government, says report

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Nigeria’s state-run oil firm used its unique trading position to
make profits at the expense of the government between 2006 and 2008, according
to an independent audit of Nigeria’s oil sale payments. The report, released
this week, said the Nigerian National Petroleum Corporation (NNPC) waited to
analyse oil market movements before choosing the most favourable pricing option
to buy Nigeria’s crude oil, while all other oil companies picked the pricing
option in advance.

“NNPC is taking advantage of its position as both buyer and
agent for the seller (the government) to make profit at the expense of the
Federation,” the report by British accountants Hart Group and Nigerian firm
S.S. Afemikhe Co said.

“Restructuring of NNPC should ensure arm’s length dealing
between the Federation and NNPC in relation to the sale of crude,” the report
commissioned by the Nigeria Extractive Industries Transparency Initiative
(NEITI) said.

Nigeria, which produces more than 2 million barrels per day
(bpd) of crude oil, is ranked by transparency watchdogs as one of the most
corrupt countries in the world. Analysts say mismanagement at NNPC has made it
one of the major blackholes in the country’s public finances.

The NEITI report highlighted discrepancies in dividend payments
made by NNPC to the government, noted unresolved oil sale revenues and
discovered large gaps between how much oil NNPC and energy companies said was
being produced.

NNPC figures showed 2.6 million barrels less oil was pumped in
2007 than oil firm accounts. The missing oil would have had a value at the time
of more than $150 million. NNPC officials were not available for comment. NEITI
is a unit of a project launched in a number of countries by former British
Prime Minister Tony Blair in 2002, aimed at improving transparency by getting
companies to publish what they pay and governments to disclose what they
receive.

Oil reforms

Problems of inefficiencies and conflicts of interests within
NNPC have been acknowledged by Nigeria’s government, which has ordered a
comprehensive audit. Many of the issues are supposed to be addressed by
wide-ranging reforms contained within the Petroleum Industry Bill (PIB)
currently before parliament. But the PIB has been repeatedly delayed and although
President Goodluck Jonathan pledged the law will be passed by May, frequent
amendments have left question marks over what the final version will include
and successfully achieve. Delays have put billions of dollars of potential
investment on hold and while many stakeholders are concerned it could increase
the cost of operating in Africa’s largest oil industry, there is growing
appetite for closure on the reform process.

“There is no certainty as to how a new system might improve
transparency,” said Antony Goldman, head of London-based PM Consulting.

“But more and more people seem to be saying that any law would
be better than no law at all. The many stakeholders may not like all elements
of new legislation in whatever final form it emerges, but they like the current
uncertainty even less.” The president’s commitment to a May deadline combined
with NEITI’s report could put more pressure on parliament to pass the bill
which some feared may never become law.

REUTERS

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