Audit-Report-on-NNPC

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Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) Between 12 January and 29 January 2015, NNPC provided transaction documents representing additional costs of $2.81 billion related to the review period, citing the NNPC Act LFN No 33 of 1977 that allows such deductions. Clarity is required on whether such deductions should be made by NNPC as a first line charge, before remitting the net proceeds of domestic crude to the federation accounts. If these are deemed not to be valid deductions, then the amount due from NNPC would be estimated at $2.07 billion (without considering expected known remittances from NPDC) or $4.29 billion (if expected known remittances from NPDC are considered). The Corporation provided details of expenses to the tune of $12.97 billion related to the review period, funded from the proceeds of domestic crude oil revenues. This is summarized in table (i) below Summary of domestic crude revenue and remittance by NNPC (January 2012 - July 2013) Description $'billions Revenue generated from domestic crude liftings 28.22 (January 2012 to July 2013) Revenue remitted from domestic crude liftings (15.99) (January 2012 to July 2013) Unremitted domestic crude revenue 12.23 Costs incurred by NNPC- ($12.97billion) Verified PMS and DPK subsidy (8.70) Demurrage claims by counterparties on product-exchange (0.14) arrangements Verified Crude oil and product losses (0.83) Verified pipeline maintenance and management costs (0.49) Other costs incurred by NNPC not directly attributable to (2.81) domestic crude (subsequently provided in 2015. See analysis in table (ii) below) NNPC potential excess remittance (0.74) Table (i) A consideration of the total costs incurred and the amount remitted potentially led to an excess remittance of $0.74bn by the Corporation during the review period as detailed in Table (ii) below: Vanguardngr Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 14
Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) Summary of crude oil revenue and remittance by NNPC (January 2012 - July 2013) Description $'billions Comments Revenue generated per reconciliation committee 67.00 Additional revenue generated upon our investigation 2.34 Actual revenue generated 69.34 Costs directly attributable to domestic crude (1.46) Total other third party financing arrangement (1.06) Equity crude oil processing cost (0.13) Unremitted revenues – NPDC (5.11) I PMS and DPK subsidy (8.70) II Amount due 52.88 Other costs not directly related to domestic crude oil operations- ($2.81billion) Salaries and benefits (1.52) Monthly operations (0.48) Other third party payments (including training course fees, estacode, and (0.81) consultancy fees, and other vendor payments) Expected remittance 50.07 Actual remittance 50.81 Potential excess remittance to the federation for the review (0.74) period Table (ii) The Corporation represented that the potential excess remittance of $0.74 billion was funded from proceeds of PMS sales for which the suppliers of the PMS are yet to be paid in cash or crude oil. As at the time of concluding this report, details of the affected suppliers that funded this potential excess remittance are yet to be provided by the Corporation. The analysis above and resulting potential excess remittance suggest the existence of liabilities to third parties incurred by the Corporation. We recommend the Corporation be required to disclose details of all existing liabilities and impact on proceeds of future crude oil sales. The Corporation is expected to operate in accordance with the NNPC Act LFN No 33 of 1977 which states in Chapter 320 Part I subsection 7(4) as follows: Vanguardngr “The Corporation shall maintain a fund which shall consist of- (a) such moneys as may from time to time be provided by the Federal Government for the purposes of this Act by way of grants or loans or otherwise howsoever; and (b) such moneys as may be received by the Corporation in the course of its operations or in relation to the exercise by the Corporation of any of its functions under this Act, and from such fund there shall be defrayed all expenses incurred by the Corporation.” Accordingly, all the Corporations costs, and those of its loss making subsidiaries have been defrayed in the analysis provided by the Corporation for the review period. However, the profit making subsidiaries and dividends received have been excluded from the analysis provided. This suggests that there are other sources of net revenues available to the Corporation not currently disclosed. A proper estimate of the actual potential excess Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 15
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