Audit-Report-on-NNPC

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Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) Objectives per engagement letter Status Scope changes (if any) Comments receipts Examine importation and sales of refined petroleum products covering: (i) Records of importation of petroleum products by NNPC giving details of each product (ii) Details of sales of imported petroleum products on monthly basis (iii) Schedule of subsidies deducted from sales of crude oil and gas for imported petroleum products Examine payment of crude oil and gas revenue to the Federation Account covering: (i) Foreign sales of crude oil and gas (USD) (ii) Domestic sales of crude oil and gas (N) (iii) Excess crude oil and gas proceeds (foreign and domestic) (iv) Mandates sent to CBN by NNPC to transfer crude oil and gas revenue to the Federation Account and to excess crude account on a monthly basis Done Not applicable Performed objectives stated in scope Done We examined crude oil sales records only rather than crude oil and gas as per the signed contract We did this because the allegations on unremitted funds relate to revenues accruing from crude oil sales Vanguardngr Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 36
Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) 3.3. Crude Oil Value Chain The Nigerian Oil and Gas sector is split into two broad categories: the upstream and downstream sectors. The upstream sector involves operations such as exploration, development, production and transportation of crude oil, while the downstream sector involves operations such as refining of crude into its various constituents, distribution and marketing. In broad terms, the Federation’s share of total crude lifted from oil terminals across the country can either be exported (Equity crude) or kept for conversion to refined products and sold locally (Domestic crude). The Federation’s equity interest, royalty interest, and PPT interest in crude oil production is sold to approved crude oil traders or off-takers and is exported with revenues accruing to the Federation. These revenues accrue through three main agents of government (i.e., Nigerian National Petroleum Corporation, the Department of Petroleum Resources, and the Federal Inland Revenue Service). The Central Bank of Nigeria maintains separate accounts with JP Morgan Chase for these agencies where funds from the applicable sale of crude by the off-takers are paid into. The term Domestic Crude Oil refers to the 445,000 barrels per day of crude oil allocated to the NNPC out of the total crude oil production of the country for the purpose of domestic consumption. This quantity of 445,000 barrels per day was derived from the installed capacity of the four (4) local refineries situated at Port Harcourt (2 refineries), Warri and Kaduna. NNPC sells to PPMC to supply the nation’s four refineries, while PPMC pays for the crude within 90 days using proceeds from refined product sales. NNPC is then expected to pay the FGN for this crude oil allocation at applicable international market prices. The diagrams below summarize the value chain: Vanguardngr Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 37
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