Audit-Report-on-NNPC

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.
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