Audit-Report-on-NNPC

Recommendations

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Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) 2.1. Summary Findings Based on the work conducted by our team from the commencement of this mandate up until 29 January 2015, our conclusions are as follows; Total gross revenues generated from FGN crude oil liftings was $69.34bn and NOT $67 billion as earlier stated by the Reconciliation Committee for the period from January 2012 to July 2013. Total cash remitted into the Federation accounts in relation to crude oil liftings was $50.81bn and NOT $47bn as earlier stated by the Reconciliation Committee for the period from January 2012 to July 2013. NNPC has provided information on the difference leading to a potential excess remittance of $0.74 billion (without considering expected remittances from NPDC). Other indirect costs of $2.81billion which were not part of the submission to the Senate Committee hearing have been defrayed to arrive at this position. The resulting potential excess remittance indicates that the Corporation operates an unsustainable model. Forty six percent (46%) of proceeds of domestic crude oil revenues for the review period was spent on operations and subsidies. The Corporation is unable to sustain monthly remittances to the Federation Account Allocation Committee (FAAC), and also meet its operational costs entirely from the proceeds of domestic crude oil revenues, and have had to incur third party liabilities to bridge the funding gap. Furthermore, the review period recorded international crude oil prices averaging $122.5 per barrel (Average Platts prices for 2012). As at the time of concluding this report, international crude oil prices average about $46.07 per barrel 2 , which is about sixty two percent (62%) reduction when compared to the crude oil prices for the review period. If the NNPC overhead costs and subsidies are maintained (assuming crude oil production volumes are maintained), the corporation may have to exhaust all the proceeds of domestic crude oil sales, and may still require third party liabilities to meet costs of operations and subsidies, and may not be able to make any remittances to FAAC. We therefore recommend that the NNPC model of operation must be urgently reviewed and restructured, as the current model which has been in operation since the creation of the Corporation cannot be sustained. The report reflects the fact that $3.38 billion was spent on DPK subsidy for the review period. We also confirmed using third party vessel tracking platforms that all vessels carrying NNPC cargoes arrived in Nigeria within the periods disclosed by PPPRA. Vanguardngr A major consideration centers on the ownership of oil and gas assets controlled by NPDC. Subject to additional information being provided, we estimate that the NNPC and NPDC should refund to the Federation Account a minimum of $1.48billion as summarised in the next page. A determination is required as to whether all or a portion of 'other costs not directly attributable to crude oil operations can be defrayed by NNPC. 2 US Energy Information Administration data on indexmundi.com Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 12
Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) Expected refund by NNPC to the FGN Description Summary of expected remittance to the Federation accounts by NNPC/ NPDC $ billion Comments Duplicated PMS subsidy claim 0.02 Duplicated DPK subsidy claim 0.04 Subsidy computation errors 0.04 Subsidy claim on un-incurred DPK cost 0.21 Over-claim of subsidy for the review period 0.98 Unsubstantiated costs and errors in cost schedules 0.78 Additional cost provided between 12 January 2015 and 29 January 2015 (2.81) (Incurred deficit)/Expected refund by NNPC/NPDC to the FGN (0.74) Unpaid signature bonus for divested assets 1.75 I Unpaid NPDC self assessed taxes and royalties 0.47 I Updated Expected refund by NNPC/NPDC to the FGN 1.48 Amounts to be refunded by NPDC to the Federation accounts out of NPDC net revenues (dividends) 3 . Vanguardngr DPK Subsidy claims for the review period I II 3 We did not have access to NPDC's full accounts and records and we have not ascertained the amount of costs and expenses which should be applied to the US$5.11billion Crude Oil revenue (net of royalties and PPT paid) per the NPDC submission to the Senate Committee which should be considered as dividend payment by NPDC to NNPC for ultimate remittance to the Federation Account. Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 13
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