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 />
4.5.3. Limitati<strong>on</strong>s<br />
We encountered some limitati<strong>on</strong>s in the course of executing some aspects of our scope of work. The<br />
key limitati<strong>on</strong>s were:<br />
<br />
<br />
<br />
Unavailability of relevant NPDC pers<strong>on</strong>nel to provide informati<strong>on</strong> <strong>on</strong> the NPDC’s processes<br />
particularly around its operati<strong>on</strong>s, business objectives and internal accounting/financial<br />
reporting, etc.<br />
Change of management at NPDC during the course of the engagement which further<br />
c<strong>on</strong>tributed to our inability to successfully obtain resp<strong>on</strong>ses to our request for informati<strong>on</strong>.<br />
N<strong>on</strong>-resp<strong>on</strong>se of NPDC to our request letter which meant that we weren’t provided with the<br />
following requests:<br />
o Detailed breakdown of the crude oil assets transferred to NPDC.<br />
o Terms of divestment and c<strong>on</strong>tract documents involving the assets taken over.<br />
o Strategic Alliance agreements between NPDC and counterparties.<br />
o M<strong>on</strong>thly volume allocati<strong>on</strong>s to Strategic Alliance Partners per partner.<br />
o M<strong>on</strong>thly balance of NPDC crude over-lifts by Strategic Alliance partners.<br />
o List of receiving banks, account numbers and bank statements for NPDC crude proceeds.<br />
4.5.4. Key Findings<br />
4.5.4.1. Ownership of NPDC assets<br />
NPDC as an incorporated company has existed and carried out petroleum explorati<strong>on</strong> activities since<br />
1988. In 2010-2011, <strong>NNPC</strong> sold its interests in the divested oil fields by SPDC to NPDC. The legality<br />
of the sale from <strong>NNPC</strong> to NPDC was widely debated during the Senate Hearings. The Attorney-<br />
General and Minister of Justice, Mr Mohammed Bello Adoke, SAN, in his letter to the Senate<br />
Committee <strong>on</strong> 18 February 2014, stated that the sale was within <strong>NNPC</strong>’s authority. It was also clearly<br />
stated in the SAA with Septa Energy that the Federal Government had granted c<strong>on</strong>sent via a Deed of<br />
Assignment dated 16 September 2010 for <strong>NNPC</strong> to assign its interest in the c<strong>on</strong>tract area to NPDC.<br />
In January 2015 (subsequent to our initial reported c<strong>on</strong>clusi<strong>on</strong>s), we were availed with copies of<br />
Deeds of Assignment for OML’s 26,30,40,42 (See exhibit I1). We were not provided with copies of<br />
Deeds of Assignment for OML’s 4,38,41,34. We were also provided with informati<strong>on</strong> which indicated<br />
that the various <strong>NNPC</strong> (55%) porti<strong>on</strong> of Oil leases (OMLs) involved in the Shell Divestments related<br />
to the eight (8) OML’s afore stated, were transferred to NPDC for an aggregate Sum of US$1.85billi<strong>on</strong><br />
(See exhibit I2). So far, <strong>on</strong>ly the amount of US$100m had been remitted in relati<strong>on</strong> to these assets<br />
(See exhibit I3). This means that the amount of US$1.75billi<strong>on</strong> is yet to be remitted in relati<strong>on</strong> to this<br />
transfer. In additi<strong>on</strong>, by a comparis<strong>on</strong> of the aggregate amount of US$1.85billi<strong>on</strong> determined by DPR<br />
as the transfer value, and the (arm’s length) commercial value paid for by 3rd parties for between<br />
30% to 45% divested by Shell, we arrive at an estimated Alternative Commercial Valuati<strong>on</strong> of<br />
US$3.4billi<strong>on</strong> for the <strong>NNPC</strong> 55%.<br />
Vanguardngr<br />
See Table below for our estimati<strong>on</strong> of the expected signature b<strong>on</strong>us required to have been paid by<br />
NPDC for the divested assets. (Please note that this is not a professi<strong>on</strong>al valuati<strong>on</strong>, but an estimate<br />
based <strong>on</strong> publicly available informati<strong>on</strong>)<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 82