Audit-Report-on-NNPC

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Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) 4.1.3. Limitation Lifting records provided by DPR could not be separated into the nature of lifting. i.e., either domestic or equity crude. 4.1.4. Key Findings 4.1.4.1. Differences between NNPC, DPR and PIA crude oil lifting records NNPC Liftings We obtained lifting records from NNPC, DPR and the PIAs in order to ascertain the total number of liftings for the period under review and obtained the figures below: Source Volumes COMD, NNPC 615,549,722 DPR 600,865,561 PIA 16 589,096,575 Table A2: Lifting records per NNPC, PIA and DPR The table above shows that COMD captured more NNPC liftings than DPR and the PIAs, and we have been able to confirm revenues from these COMD liftings to either the JP Morgan accounts or submissions to FAAC. For this reason, we relied on the revenue figures generated from COMD numbers. However, during the Senate Hearing, the former NPDC MD Mr Victor Briggs disclosed that NPDC lifted 61,027,701 barrels of crude oil for the review period. This is more than the volume recorded by COMD of 50,536,316 barrels of crude oil. Discussions with COMD revealed that not all NPDC liftings are captured by COMD due to the fact that some of the NPDC liftings are lifted by the Strategic Alliance Agreement partners (See further analysis in section 4.5).As a result; we used the volumes and values provided by the MD of NPDC at the Senate hearing in our analysis. Conclusion Based on the information analyzed above we have adopted the liftings below for our review: S/N NATURE COMD Volumes (bbls) 1 Equity 128,741,037 2 Domestic Crude 254,738,219 3 FIRS 144,811,144 4 DPR 14,411,415 5 NPDC 61,027,701 6 Third Party Financing 22,311,591 TOTAL 626,041,107 Table A4: Liftings reviewed Vanguardngr 16 Details on Appendix 6.1.32 Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 46
Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) 4.1.4.2. $3.6 million Under-valuation of crude oil lifting by NNPC The Methodology of Nigerian Crude Pricing 17 by NNPC is based on a 5-working day structure with respect to the date of bill of lading (B/L) which is the exact date of crude oil lifting. The price of crude is determined after lifting with respect to Platt’s Dated Brent price quotation, being used as the benchmark. The crude is allocated to the buyer at least 45 days prior to the loading date when the buyer is also informed by NNPC of the volume of crude oil, the grade of crude, among others. The NNPC employs three pricing scenarios when selling their crude to customers. These are: 1. Prompt (Default Option) 2. Advanced 3. Deferred A buyer is conceptually allowed to elect one of the three pricing scenarios to be applied to his purchase. In the event that a buyer chooses not to elect any of the pricing scenarios, NNPC automatically adopts the default (Prompt) pricing scenario. Prompt pricing option – refers to the average of the Dated Brent Price for 5 days after the Bill of Lading date. Advanced pricing option – refers to the average of the Dated Brent Price for 5 days before the bill of lading date. Deferred pricing option – refers to the average of the Dated Brent price for 6 to 10 days after the Bill of lading date. Based on the lifting records reviewed, the pricing option chosen by each off-taker and the pricing methodology described above, we computed the Official Selling Prices (OSP) for all the crude oil liftings. We compared our computation with the values reported by COMD and noted differences that resulted in an under-valuation of $32,909,590 relating to thirteen different liftings 18 (Equity and domestic crude) during the review period. The following explanations were provided by NNPC for the differences noted: Differences resulting in value loss to the Federation Under-valuation of $1,503,540 Of the $33 million, COMD agreed that for two liftings 19 (with an under-valuation of $1,503,540), they had made valuation errors by computing the amounts due using a different pricing option in one case and a wrong Official Selling Price (OSP) in the other. Vanguardngr Under reporting to FAAC of $2,107,275 For four other liftings 20 with differences totaling $2,107,275, the unit prices on the schedule received did not agree with our recomputation. We checked the liftings to COMD’s valuation documents and observed that the prices agree with our recomputation but were just different on 17 From discussions with Crude Oil Marketing Division of NNPC (COMD) 18 See Appendix 6.1.2 for details of affected liftings 19 Liftings 3 and 4 0n Appendix 6.1.2 20 Liftings 10 – 13 on Appendix 6.1.2 Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 47
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