Audit-Report-on-NNPC

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Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) 4.8. Holding Cost of Strategic Reserve 4.8.1. Introduction The sum of $459,985,849 (which was approximated to $0.46billion during the Senate Hearing) was stated to have been incurred as holding cost of strategic reserves between January 2012 and July 2013. The components of the holding costs were demurrage costs of $207,892,239 and NPA Charges of $252,093,610. Cost Amount $ Demurrage Cost 207,892,239 NPA Charges 252,093,610 TOTAL 459,985,849 Table H1 – Holding Cost of Strategic Reserve The Demurrage costs are claims made by oil traders for the extra days spent (outside the agreed delivery period) by their nominated vessels when delivering refined products to NNPC. Our discussions with PPMC revealed that NNPC, due to the limited capacity of reserve tanks and the need to ensure sufficient reserve of petroleum resources in the country, makes use of vessels as temporary storage facilities. The oil traders compute demurrage based on agreed rates and submit such claims to PPMC. A reconciliation meeting is then held periodically with PPMC to agree on PPMC’s demurrage obligation to the traders. We were also informed by PPMC that since the traders are part of existing OPA and Product Exchange contracts with NNPC, demurrage claims are sometimes not settled in cash, but are settled in kind through future supply of refined products by the trader. The NPA Charges are fees paid by vessels anchoring at the various ports in Nigeria. 4.8.2. Procedures Performed/Work done Obtained and reviewed the schedule showing the breakdown of the claims. Requested for the supporting documents for the claims. Held discussions with PPMC, and Group Treasury Department of NNPC to obtain information. 4.8.3. Limitation Vanguardngr Neither PPMC nor NNPC provided any support for NPA charges classified as part of the Holding Costs of Strategic Reserves. Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 104
Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) 4.8.4. Key Findings 4.8.4.1. $64.8 million of Demurrage costs could not be verified After the submission of our initial report to the <strong>Audit</strong>or-General of the Federation on 28 November 2014, the following was brought to our attention by NNPC regarding Demurrage claims: Only Demurrage claims by traders involved in Swap arrangements result in a direct reduction in value from the refined products supplied by the traders. Such claims therefore account for the reduction in expected domestic crude revenue remittance. We were provided with the latest reconciled demurrage position agreed between NNPC/PPMC and the oil traders which would have reduced the value of refined products supplied by the traders. The total claim by the 4 oil traders affected relating to January 2012 - July 2013 liftings amounted to $143million. This is summarized in Table H3 below. Oil trader Total ($) Trafigura 47,943,908 Ontario 32,736,577 Aiteo 24,241,094 Taleveras 38,213,408 Total costs 143,134,988 Table H3: Demurrage claims on crude lifted under swap contracts between January 2012 - July 2013 Demurrage claims by SIR (the oil trader involved in Offshore Processing Arrangement with NNPC/PPMC) are invoiced and settled by cash. We were informed by NNPC that due to certain contract disagreements, none of the claims were settled during the period under review. Amounts relating to SIR have therefore been excluded from the explanations for unremitted crude oil revenue. 4.8.4.2. Unsubstantiated $0.25billion NPA Charges claim No supporting documents were provided for the $0.25billion claimed as NPA Charges. Vanguardngr Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 105
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