A sharp decline in global oil prices has affected the economy of Nigeria but investigations revealed that the Nigerian National Petroleum Corporation (NNPC) may have withheld several billions of Dollars in oil revenue from its Okono OML 119 oil field. Assistant Editor Seun Akioye reports
SIX years ago, Dr. E.O Ayoola, a Managing Director at the Nigerian Petroleum Development Company (NPDC) a subsidiary of the Nigerian National Petroleum Corporation (NNPC), in the company of the company’s Legal Counsel/Company Secretary, I. Owugie Esq, met with Agip Energy and Natural Resources (Nigeria) Limited (AENR) officials.
The meeting, which held on October 12, 2000, was the signing of the service contract for the development of Okono/Okpoho fields in the Oil Processing License (OPL) 91. Going by the contractual agreement, the parties were to jointly finance and carry out operations in the oil field located in the Niger Delta, about 55 kilometre from the Nigerian coast in water depth ranging from 210 to 250 feet.
The field was discovered by the NPDC between 1978 and 1983 but real production was stalled until the signing of the service contract with AENR. When the contract kicked off the following year, OPL 91 had been approved as Oil Mining License (OML) 119. The contract signed by Ayoola and Owugie in all intent and purpose considered the interest of Nigeria.
The contract to develop Okono OML 119 by the AENR did not come cheaply. In the service contract form which was obtained by The Nation, a pre-development fee of $40 million was paid by AENR to the NPDC. The fee was paid 60 days after the contract was signed.
According to the contract details, the pre-development cost “shall not be recoverable as cost in oil.”
The contract was also expected to end when the cumulative production of Okono and Okpoho oil fields have reached 119 barrels of crude oil.
Under Article 4 of the contract, AENR shall be required to provide “all funds required for the full development of Okono and Okpoho fields and all incidental costs related hereto.” AENR was also expected to transfer technology to the NPDC, following the expiration of the contract.
AENR, according to the contract, was also expected to provide facilities for the training of NPDC-NNPC staff and $350,000 for a period of five years. The money was to be paid in January of each year into a dedicated account nominated by the NPDC and the cost shall be recoverable in oil.
In turn, the contractor (AENR) also had the rights to lift and freely export and retain overseas the receipts from the sale of available oil.
It was also agreed that petroleum operations shall be carried out by joint conduct between the parties while the NPDC was expected to take over fully the operations after the recovery of all development costs within three years and not later than five years.
According to Article 8.2, the contract set modalities for the funding of the operation. It stated that the production operation shall be funded by direct allocation from available crude oil.
The cost of oil production which would be borne by AENR had already insulated the NPDC from any cost towards the production of oil in Okono and Okpoho OML 119 leaving a sharing formula of profit up to the full recovery of development cost as NPDC: 30 per cent and AENR 70 per cent. Thereafter, according to the contract, the profit shall be shared with NPDC taking 60 per cent and AENR getting 40 per cent.
The contract also granted the NPDC ownership of all natural gas, land and immovable equipment on the site.
The Okono OML 119 was a good and lucrative deal for the parties involved.
According to the NNPC Annual Statistical Bulleting (ASB), the total national oil and condensates production in 2005 was 918,972, 465 barrels with NPDC contributing 21,926, 519 barrels.
The NNPC own document made available to The Nation suggested that Okono OML 119 was so profitable that it accounted for an increase in the corporation’s revenue.
“NPDC revenue increase in 2005 is mainly attributable to the sustained production from Okono/Okpoho fields and the unprecedented and favourable global oil prices”, the bulleting said.
Also in 2005 Okono stream 19,900,957 barrels with an average daily production of 54,523 barrels contributing 2.17 per cent to national average. The NPDC exported 20,140 barrels with the difference of 83,920,920 barrels reserved for the Petroleum Product Marketing Company (PPMC), another subsidiary of the NNPC.
NPDC and its unremitted revenue
The Nigerian Petroleum Development Company (NPDC) Ltd, a subsidiary of the Nigerian National Petroleum Corporation (NNPC), is involved in oil & gas exploration and production activities in the hydrocarbon-rich coastal region, both onshore and offshore; and of lately, around Equatorial Guinea.
Established in 1988, it has its operations concentrated mainly in 257 communities in five Niger Delta states of Edo, Delta, Imo, Bayelsa and Rivers) and. Since inception, it has had 38 concessions – 31 OML and 7 OPL. It has 100 per cent ownership of seven oil blocks including OMLs 13, 16,64,65,66,111 and 119.
It is the fifth largest producer in the country with a production capacity of about 205,007 barrels per day (bpd). Of this number, Okono OML 119 accounts for about 70,000bpd.
However, there have been several allegations against NPDC and its parent company the NNPC over unremitted revenue from its oil blocks.
The Nigeria Extractive Industry Transparency Initiative (NEITI), a Federal Government body charged with ensuring transparency and accountability in the oil and gas and extractive industry, has been consistent in accusing the NNPC and its many subsidiaries of not remitting billions of dollars to the Federation Account.
Besides NEITI’s allegation, different parliamentary probes and audits have indicted the NNPC for failing to remit revenues due to the Federation Account. The NEITI had alleged that the NNPC which manages 49 per cent of Federal Government’s share in Nigeria Liquefied Natural Gas Ltd (NLNG), failed to remit the yearly dividends from this share of about $1.5 billion. According to reports, the sharp practice is said to have stretched back to decade with about $10 billion unaccounted for.
The NPDC was reported to have produced 80,243 barrels of oil per day in 2013 but there was no record that the NNPC remitted any of the revenues from the oil blocks being operated by NPDC.
The PricewaterhouseCooper (PwC), an audit firm hired by the Federal Government to look into the books of oil corporation and other revenue-generating agencies, also estimated the total earnings from NPDC oil sales between 2012 and 2013 to be $6.82 billion.
It is difficult to reconcile how much the NPDC actually earned even from crude oil lifting and sales figures from the Department of Petroleum Resources (DPR), the Crude Oil Marketing Department (COMD) of the NNPC and the company itself.
Where is NPDC oil revenue?
In August last year, the Natural Resource Governance Institute (NRGI) released a report titled: Inside NNPC oil sales: A case for reform in Nigeria. After its extensive investigation into the NPDC oil revenue, NRGI claimed that the corporation has not refunded any revenue to the Federation Account from its oil wells. “When NNPC sells oil from blocks owned by NPDC, it does not forward any proceeds to the treasury,” the NRGI said.
The Nation investigations showed that the NPDC oil sales come from two main sources: Okono OML 119 and Forcados equity lifting from former Shell blocks. The NGRI alleged that the NNPC “appears to retain all the oil sale revenues from both sources.”
The NGRI also said the NNPC has sold the oil from Okono OML 119 for NPDC to a few private oil traders including Taleveras who had in turn sold it to foreign buyers.
NRGI said in its report: “Our research found no evidence that the NNPC forwarded to the treasury any earnings from the more than 110 million barrels of Okono crude it reported selling between 2005 and 2014.
“Using average annual sales prices, we provisionally estimate that this oil was worth up to $12.38 billion. It is not clear why NNPC, or NPDC, would need to withhold from the treasury such large earnings resulting from the sale of OML 119’s output.”
The NGRI also said there was no evidence from the NNPC reporting to other government agencies on the proceeds from the sale of Okono oil. A review of NNPC crude oil lifting and sales profiles in NNPC monthly presentation to the Federal Accounts Allocation Committee (FAAC) Technical sub-Committee from 2005 to 2015 did not reveal any remittance from Okono OML 119.
In 2012, NEITI audit report put the total crude oil production at 861,713,312 barrels out of which the NNPC lifted 380.6 million barrels.
The report said: “However, further revelations by the Audit show that the actual NNPC lifting in 2012 on behalf of the federation was about 403 million barrels (Four hundred and three million barrels) resulting in the difference of about 22 million barrels (Twenty two million barrels).
These differences the report said was as a result of non-disclosure of the lifting from two oil terminals (Okono and Pan Ocean) in the NNPC COMD (Crude Oil Marketing Division) document.”
The Nation investigation was unable establish who controls the revenue from Okono oil sales as this newspaper could not find any listing for the controllers or where the funds are lodged. According to the PwC report, NPDC has no settled practice of paying dividends into the treasury.
It said: “The Corporation (NNPC) operates an unsustainable model. Forty six percent (46 per cent) of proceeds of domestic crude oil revenues for the review period was spent on operations and subsidies. The Corporation is unable to sustain monthly remittances to the Federation Account Allocation Committee (FAAC), and also meet its operational costs entirely from the proceeds of domestic crude oil revenues, and have had to incur third party liabilities to bridge the funding gap.”
Apart from non-disclosure of the millions of barrels of oil from Okono OML 119 running into millions of unremitted dollars, the PwC audit report also showed that the NNPC was lodging proceeds from Okono oil sales into a “NPDC/NNPC Special Account” which the NNPC controls. The report reveals that $3.975 billion went into the “Special Account” for 2012 oil sales.
Further investigations showed that one of the local companies which has benefited from Okono oil sold by the NNPC is Taleveras, which was established in 2004.
Its founder and chairman, Igho Charles Sanomi II, is alleged to be an ally of former Petroleum Resources Minister, Mrs. Allison Deziani. When The Nation visited the Televeras office in Abuja, it has been sealed by the Federal Inland Revenue Services (FIRS) over a N667 million tax liability.
However, sources in other oil companies which also bought Okono oil from the NNPC told The Nation that payments were made to the NNPC for every barrel of oil purchased.
“I can tell you that we paid. We have documents and receipts to show how and when we paid for every barrel of oil we bought. If the NNPC did not remit the money, then it is their cross to carry”, a source said.
The allegations against the NNPC on Okono are weighty. According to the NRGI, the estimated crude oil revenues being unaccounted for by NNPC from Okono oil is $12,384 billion which is the total amount the NNPC is estimated to have withheld between 2005 and 2013.
On how it arrived at the figure, the NRGI said: “For 2005-2013, we used Platts reference prices for Forcados grade crude minus a discount of between $1 and $2 per barrel (with rounding to the nearest dollar) to reflect the generally lower monthly OSPs that NNPC COMD sets for Okono vis-à-vis forcados.”
Despite the deluge of allegations against the Corporation, the NNPC has turned down every invitation for an interview. Its Group General Manager, Group Public Affairs Division Mallam Garba-Deen Mohammed, evaded several requests for interview and clarifications.
Even the questions sent to him were unanswered and his promises to respond went unfulfilled.
The Nigerian Agip Oil Company also refused to comment on any question on Okono oil lifting, Tajudeen Adigun, its Deputy Division Manager, did not respond to the many requests for an interview. But media reports had suggested that AENR has since been replaced by Petrofac and Taleveras in a Strategic Alliance Partnership with the NPDC.
But sources in Petrofac London Head Office, who cannot be named as they have not been authorised to speak on the subject, confirmed to The Nation that the two corporations indeed entered into a strategic alliance agreement with the NPDC for a potential further development of OML 119, AENR continues to operate OML 119 and Petrofac has not received any production revenue from it.
The NNPC has also refused to speak on these revelations.
“We are always angry with the government, we are never happy,” the hosts communities protest.
The steel bridge connecting Nembe community, in Nembe Local Government Area of Bayelsa State, is about one kilometer from the Ogbia-Nembe Expressway. One could see the corroded railings. It wide enough to contain a motorcycle; cars are hardly seen in the community.
There is no cheering news about Nembe, either in its turbulent past or recent history. The community is plagued by violence and militancy, majorly directed against the multinational oil companies and oil installations in the area.
Chief Augustine Ekigha Eweka is angry and he not hidden his anger, which is directed at the oil companies including Shell Petroleum Development Company, (SPDC) and AGIP who have oil facilities in the area. He is also angry with the NNPC whose subsidiary also owns the Okono OML 119.
Eweka is the Head Chief, Eweka group of Houses and the Vice Chairman, Nembe Council of Chiefs, the highest traditional decision making body in the community. For many years, he has seen oil companies promised and failed.
“What we get here from the government and the oil companies is not equivalent to what they take away from us. In fact, it is zero per cent to what they take every day. We produce the best oil in Bonny Light and we are suffering”, Eweka lamented.
The suffering is visible in Nembe in the corrugated roofs and the poverty that seems etched permanently on the faces of the about 28,000 inhabitants of the community.