Audit-Report-on-NNPC

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Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) 4.3. Other Third Party Financing 4.3.1. Introduction Out of the alleged unremitted 0il revenue of $20billion, NNPC accounted for $2billion as amounts generated under Other Third Party Financing Arrangements with two (2) International oil companies; Mobil Producing Nigeria (“MPN”) and Total Exploration and Production Nigeria (“TEPNG”) 33 . Both oil companies made submissions at the Senate Public Hearing on the nature and status of their financing arrangements with NNPC. Our review of the oil companies’ submissions revealed that Mobil Producing Nigeria participated in a Joint Venture with NNPC on two projects, Reserves Development Project (RDP) and Satellite Field Development Project (SFDP), while TEPNG participated in the production of USAN crude oil stream. Their submissions further showed that NNPC’s lifting revenues for the third party financing arrangements with MPN and TEPNG were $1,376,820,326 and $1,053,519,002 respectively 34 , totaling $2,430,339,328.00, as shown in Table C1 below. Joint Venture Partners Projects NNPC’s Revenue ($) NNPC/MPN Reserves Development Project (RDP) 518,069,354 NNPC/MPN Satellite Field Development Project (SFDP) 858,750,973 NNPC/TEPNG USAN Crude Oil stream 1,053,519,002 TOTAL 2,430,339,328 Table C1 – Submissions at the Senate hearing by Total and Mobil Modalities of the Projects Due to liquidity challenges, NNPC was funding Exploration and Production (Capex and Opex) using external lenders. In this instance, the NNPC and its Joint Venture (JV) partners form a Special Purpose Vehicle (SPV) which sources funds externally. The SPV repays the lender using crude oil from production. NNPC operated two projects with Mobil Producing Nigeria; RDP and SFDP, and had a 60 percent share, with the remaining 40 percent for MPN. Vanguardngr The Reserves Development Project (RDP) was set up for the construction and drilling of 27 oil wells in 10 Joint Venture assets, inclusive of three work-overs within three OMLs operated under the JV. The total cost of the RDP was $1.5billion which was sourced as loans from both Nigerian and international commercial banks. Each JV partner lifts separately with proceeds from crude oil sales deposited into an offshore Escrow Account. The Satellite Field Development project (SFDP) is a Joint Venture project set up to fund and develop up to 22 undeveloped oil and gas fields and restore production to two developed non-producing fields in Nigeria. The Project was set up in phases with Phase 1 comprising the restoration of two shut-in 33 Senate Committee Submissions 34 MPN and TEPNG ‘s Submission during the Senate Hearing Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 60
Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) fields (Isobo and Asabo, “Primer Projects”) and the development of three Satellite Oil Fields (Abang, Oyot, Itut, “AOI Satellites”) and Phase II, a roll-over of Phase I. The loan size of the project (phase I) was $600million with NNPC and MPN’s exposure at 60% and 40% respectively. TEPNG Nigeria participated in the production of Usan crude oil stream which commenced on February 24, 2012. Their agreement was a Production Sharing Contract (“PSC”) in respect of Oil Mining Lease (“OML 138”) where the financing arrangements were to be provided by JV Operators/ Contractor Group. The Contractor Group includes Chevron Petroleum, Esso Exploration and Production Nigeria (Offshore East) Limited (“Esso”), Nexen Petroleum Nigeria Limited and TEPNG. The revenues from liftings are paid into an Escrow account and subsequently shared between the Contractor Group and NNPC after royalties, tax and operating cost deductions have been made. 4.3.2. Procedures Performed The procedures performed were: i. Reviewed the submissions of MPN, TEPNG and the Accountant General of the Federation to the Senate to understand their respective claims and roles relating to the unremitted crude oil revenue. ii. Requested information from MPN and Total to understand the modalities of the arrangement with NNPC. iii. Obtained schedules of the volumes and value of crude oil liftings for the third party arrangements from relevant agencies; Department of Petroleum Resources (DPR), Crude Oil Marketing Division (COMD) and Pre-shipment Inspection Agencies (PIAs). iv. Reviewed the records obtained from the various agencies in iii above, to highlight any variances. v. Compared findings from “iii” and “iv” above to lifting records provided by the International Oil Companies. vi. Requested contract documents between NNPC and other oil companies on the third party financing arrangements to gain understanding of the binding contract. vii. Obtained and reviewed the statement of accounts for JP Morgan’s CBN/NNPC Crude Oil and Gas Revenue Account to confirm remittance of the proceeds to the Federation. viii. Reviewed extracts of the CBN Royalty account to confirm remittance of Royalty to the Federation. 4.3.3. Limitations We relied on the submissions made by Mobil and Total at the Senate hearing, as we were granted limited access to both IOC’s during our review. Vanguardngr Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 61
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