Audit-Report-on-NNPC
Audit-Report-on-NNPC
Audit-Report-on-NNPC
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Investigative Forensic audit of crude oil revenues and remittances by <strong>NNPC</strong> (January 2012 – July 2013)<br />
2.1. Summary Findings<br />
Based <strong>on</strong> the work c<strong>on</strong>ducted by our team from the commencement of this mandate up until 29<br />
January 2015, our c<strong>on</strong>clusi<strong>on</strong>s are as follows;<br />
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Total gross revenues generated from FGN crude oil liftings was $69.34bn and NOT<br />
$67 billi<strong>on</strong> as earlier stated by the Rec<strong>on</strong>ciliati<strong>on</strong> Committee for the period from January<br />
2012 to July 2013.<br />
Total cash remitted into the Federati<strong>on</strong> accounts in relati<strong>on</strong> to crude oil liftings was<br />
$50.81bn and NOT $47bn as earlier stated by the Rec<strong>on</strong>ciliati<strong>on</strong> Committee for the period<br />
from January 2012 to July 2013.<br />
<strong>NNPC</strong> has provided informati<strong>on</strong> <strong>on</strong> the difference leading to a potential excess remittance of<br />
$0.74 billi<strong>on</strong> (without c<strong>on</strong>sidering expected remittances from NPDC). Other indirect costs of<br />
$2.81billi<strong>on</strong> which were not part of the submissi<strong>on</strong> to the Senate Committee hearing have<br />
been defrayed to arrive at this positi<strong>on</strong>.<br />
The resulting potential excess remittance indicates that the Corporati<strong>on</strong> operates an<br />
unsustainable model. Forty six percent (46%) of proceeds of domestic crude oil revenues for<br />
the review period was spent <strong>on</strong> operati<strong>on</strong>s and subsidies. The Corporati<strong>on</strong> is unable to sustain<br />
m<strong>on</strong>thly remittances to the Federati<strong>on</strong> Account Allocati<strong>on</strong> Committee (FAAC), and also meet<br />
its operati<strong>on</strong>al costs entirely from the proceeds of domestic crude oil revenues, and have had<br />
to incur third party liabilities to bridge the funding gap. Furthermore, the review period<br />
recorded internati<strong>on</strong>al crude oil prices averaging $122.5 per barrel (Average Platts prices for<br />
2012). As at the time of c<strong>on</strong>cluding this report, internati<strong>on</strong>al crude oil prices average about<br />
$46.07 per barrel 2 , which is about sixty two percent (62%) reducti<strong>on</strong> when compared to the<br />
crude oil prices for the review period. If the <strong>NNPC</strong> overhead costs and subsidies are<br />
maintained (assuming crude oil producti<strong>on</strong> volumes are maintained), the corporati<strong>on</strong> may<br />
have to exhaust all the proceeds of domestic crude oil sales, and may still require third party<br />
liabilities to meet costs of operati<strong>on</strong>s and subsidies, and may not be able to make any<br />
remittances to FAAC.<br />
We therefore recommend that the <strong>NNPC</strong> model of operati<strong>on</strong> must be urgently<br />
reviewed and restructured, as the current model which has been in operati<strong>on</strong><br />
since the creati<strong>on</strong> of the Corporati<strong>on</strong> cannot be sustained.<br />
The report reflects the fact that $3.38 billi<strong>on</strong> was spent <strong>on</strong> DPK subsidy for the review period.<br />
We also c<strong>on</strong>firmed using third party vessel tracking platforms that all vessels carrying <strong>NNPC</strong><br />
cargoes arrived in Nigeria within the periods disclosed by PPPRA.<br />
Vanguardngr<br />
A major c<strong>on</strong>siderati<strong>on</strong> centers <strong>on</strong> the ownership of oil and gas assets c<strong>on</strong>trolled by NPDC.<br />
Subject to additi<strong>on</strong>al informati<strong>on</strong> being provided, we estimate that the <strong>NNPC</strong> and NPDC<br />
should refund to the Federati<strong>on</strong> Account a minimum of $1.48billi<strong>on</strong> as summarised in the<br />
next page.<br />
A determinati<strong>on</strong> is required as to whether all or a porti<strong>on</strong> of 'other costs not directly<br />
attributable to crude oil operati<strong>on</strong>s can be defrayed by <strong>NNPC</strong>.<br />
2<br />
US Energy Informati<strong>on</strong> Administrati<strong>on</strong> data <strong>on</strong> indexmundi.com<br />
C<strong>on</strong>fidential informati<strong>on</strong> for the sole benefit and use of the <str<strong>on</strong>g>Audit</str<strong>on</strong>g>or-General for the Federati<strong>on</strong>.<br />
PwC 12