Audit-Report-on-NNPC
Audit-Report-on-NNPC
Audit-Report-on-NNPC
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Investigative Forensic audit of crude oil revenues and remittances by <strong>NNPC</strong> (January 2012 – July 2013)<br />
4.1.4.2. $3.6 milli<strong>on</strong> Under-valuati<strong>on</strong> of crude oil lifting by <strong>NNPC</strong><br />
The Methodology of Nigerian Crude Pricing 17 by <strong>NNPC</strong> is based <strong>on</strong> a 5-working day structure with<br />
respect to the date of bill of lading (B/L) which is the exact date of crude oil lifting.<br />
The price of crude is determined after lifting with respect to Platt’s Dated Brent price quotati<strong>on</strong>, being<br />
used as the benchmark. The crude is allocated to the buyer at least 45 days prior to the loading date<br />
when the buyer is also informed by <strong>NNPC</strong> of the volume of crude oil, the grade of crude, am<strong>on</strong>g<br />
others. The <strong>NNPC</strong> employs three pricing scenarios when selling their crude to customers.<br />
These are:<br />
1. Prompt (Default Opti<strong>on</strong>)<br />
2. Advanced<br />
3. Deferred<br />
A buyer is c<strong>on</strong>ceptually allowed to elect <strong>on</strong>e of the three pricing scenarios to be applied to his<br />
purchase. In the event that a buyer chooses not to elect any of the pricing scenarios, <strong>NNPC</strong><br />
automatically adopts the default (Prompt) pricing scenario.<br />
Prompt pricing opti<strong>on</strong> – refers to the average of the Dated Brent Price for 5 days after the Bill of<br />
Lading date.<br />
Advanced pricing opti<strong>on</strong> – refers to the average of the Dated Brent Price for 5 days before the bill of<br />
lading date.<br />
Deferred pricing opti<strong>on</strong> – refers to the average of the Dated Brent price for 6 to 10 days after the Bill<br />
of lading date.<br />
Based <strong>on</strong> the lifting records reviewed, the pricing opti<strong>on</strong> chosen by each off-taker and the pricing<br />
methodology described above, we computed the Official Selling Prices (OSP) for all the crude oil<br />
liftings. We compared our computati<strong>on</strong> with the values reported by COMD and noted differences that<br />
resulted in an under-valuati<strong>on</strong> of $32,909,590 relating to thirteen different liftings 18 (Equity and<br />
domestic crude) during the review period.<br />
The following explanati<strong>on</strong>s were provided by <strong>NNPC</strong> for the differences noted:<br />
Differences resulting in value loss to the Federati<strong>on</strong><br />
Under-valuati<strong>on</strong> of $1,503,540<br />
Of the $33 milli<strong>on</strong>, COMD agreed that for two liftings 19 (with an under-valuati<strong>on</strong> of $1,503,540),<br />
they had made valuati<strong>on</strong> errors by computing the amounts due using a different pricing opti<strong>on</strong> in<br />
<strong>on</strong>e case and a wr<strong>on</strong>g Official Selling Price (OSP) in the other.<br />
Vanguardngr<br />
Under reporting to FAAC of $2,107,275<br />
For four other liftings 20 with differences totaling $2,107,275, the unit prices <strong>on</strong> the schedule<br />
received did not agree with our recomputati<strong>on</strong>. We checked the liftings to COMD’s valuati<strong>on</strong><br />
documents and observed that the prices agree with our recomputati<strong>on</strong> but were just different <strong>on</strong><br />
17<br />
From discussi<strong>on</strong>s with Crude Oil Marketing Divisi<strong>on</strong> of <strong>NNPC</strong> (COMD)<br />
18<br />
See Appendix 6.1.2 for details of affected liftings<br />
19<br />
Liftings 3 and 4 0n Appendix 6.1.2<br />
20<br />
Liftings 10 – 13 <strong>on</strong> Appendix 6.1.2<br />
C<strong>on</strong>fidential informati<strong>on</strong> for the sole benefit and use of the <str<strong>on</strong>g>Audit</str<strong>on</strong>g>or-General for the Federati<strong>on</strong>.<br />
PwC 47