Ribadu Report Uncovers Sleaze in Oil and Gas Sector.

 THISDAY                         (Mallam Nuhu Ribadu)

Matters arising.

Nigeria has lost out on tens of billions of dollars in oil and gas revenues over the last decade from cut-price deals struck between multinational oil companies and government officials, a report of the Petroleum Revenue Special Task Force has said.

The 146-page document was produced by the 17-member task force, which is headed by the former Chairman of the Economic and Financial Crimes Commission (EFCC), Nuhu Ribadu, set up by the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, in January. It covers the year 2002 to the present.

According to the Reuters news agency, the report provides new details on Nigeria's long history of corruption in the oil sector, which has enriched its elite and provided the oil majors with hefty profits while two thirds of the people live in poverty.

Alison-Madueke confirmed on Tuesday that she had received the report last month but that it was a draft and the government was still supposed to give its input. But the report submitted by the Ribadu committee was marked “final”.
The report concluded that oil majors - Shell, Total and Eni - made bumper profits from cut-price gas, while Nigerian oil ministers handed out licences at their own discretion.

This, while not illegal, did not follow best practice of using open bids. Hundreds of millions of dollars in signature bonuses on those deals were also missing, Reuters reported.

“We have not seen this report and are, therefore, unable to comment on the content, but we will study it if and when it is published,” a Shell spokesman said.

The report alleges that international oil traders sometimes buy crude without any formal contracts, and the Nigerian National Petroleum Corporation (NNPC) had short-changed the federation of billions of dollars over the last 10 years by selling crude oil and gas to itself below market rates.

There was no suggestion that the oil majors or traders had done anything illegal, but the report highlighted a lack of transparency in their dealings.

The Ribadu committee was among several set up by Alison-Madueke following a week of nationwide strikes against a rise in fuel prices in January, which morphed into a campaign against oil corruption.

It had as its terms of reference: To work with consultants and experts to determine and verify all petroleum upstream and downstream revenues (taxes, royalties, etc.) due and payable to the Federal Government of Nigeria;

• To take all necessary steps to collect all debts due and owing;

• To obtain agreements and enforce payment terms by all oil industry operators;

• To design a cross debt matrix between all Agencies and Parastatals of the Federal Ministry of Petroleum Resources;

• To develop an automated platform to enable effective tracking, monitoring, and online validation of income and debt drivers of all parastatals and agencies in the Federal Ministry of Petroleum Resources;

• To work with world-class consultants to integrate systems and technology across the production chain to determine and monitor crude oil production and exports, ensuring at all times, the integrity of payments to the Federal Government of Nigeria; and

• To submit monthly reports for ministerial review and further action.

The report shows that billions of dollars of revenue was missing in unpaid debts from signature bonuses and royalties.
Nigeria Liquefied Natural Gas (NLNG) Company, which is jointly owned by the NNPC, Shell, Total and Eni, had paid the country for gas at cut-down prices before exporting it to international markets, the report added.

Total and Eni declined to comment because they invest in but do not operate Nigeria LNG, a role held by Shell.
“The estimated cumulative of the deficit between value obtainable on the international market and what is currently being obtained from NLNG, over the 10-year period, amounts to approximately $29 billion,” the report said.

It also said foreign oil firms had outstanding debts.
Addax, now a unit of China's state-owned Sinopec, owes Nigeria $1.5 billion in unpaid royalties, part of a $3 billion black hole of unpaid bonuses and royalties owed by oil firms.

Addax did not respond to requests for comment, but the report noted it disputes owing the signature bonuses.
Shell owes Nigeria's government N137.57 billion ($874 million) for gas sold from its Bonga deep offshore field, the report said, while oil majors owed $58 million between them for gas flaring penalties. They were also not adhering to newer higher fines.

The report also revealed that Nigeria was the only nation to sell all its crude through international oil traders rather than directly to refineries, adding that such trades were often opaque.

It said some international oil traders who were not “on the approved master list of customers” had been sold crude oil “without a formal contract” so little could be obtained about the details of these deals, which can be worth hundreds of millions of dollars

.

“This logically will serve to reduce margins obtainable on sale of crude oil,” the report observed.
But Alison-Madueke disputed this, saying there are no informal contracts and there is “an official tender put out every year,” which could be seen by the public in newspapers.

NNPC gets an allocation of 445,000 bpd of crude oil to refine locally but has been selling its allocation at cut-down prices, a practice which cost Nigeria $5 billion in potential revenue between 2002 and 2011, the report said.

On this, the minister said: “NNPC buys at international rates.”
The report said the NNPC made N86.6 billion over the 10-year period by using overly generous exchange rates in its declarations to the government, but there was no sign of the money.

Oil ministers between 2008 and 2011 handed out seven discretionary licences but there is $183 million in signature bonuses missing from the deals, the report said. Three of these oil licences were awarded since Alison-Madueke took up her position in 2010, according to the report.

“I have not given any discretionary awards during this administration,” Alison-Madueke told Reuters, although she added that the president had the right to do so instead of using bids if he saw fit. “That is entirely up to him,” she said.

Among the report’s recommendations included NNPC being reorganised or scrapped, an independent review of the use of traders to be set up, and a transparency law that should be passed requiring oil companies to disclose all payments made to Nigeria.

U.S. regulators put new rules in place in August that will require U.S.-listed oil and gas companies to disclose payments they make to foreign governments like Nigeria.

But in a move aimed at providing clarity on her interview with Reuters, Alison-Madueke last night said that the reports of committees set up earlier in the year to investigate certain areas of Nigeria’s oil and gas sector would soon be delivered to the government.

In a statement from the acting General Manager Public Affairs of NNPC, Mr. Fidel Pepple, Alison-Madueke was quoted as telling Reuters that "the report is not normally put in the public domain until the government’s complete report is finalised.

“What normally happens when you set up a committee is that when the committee hands in its report, a team is put together by the arm of government or agency that set up the committee in the first place. That has already happened.

“That team consists of people with relevant experience in the area. So, it is not just about the Revenue Task Force. The Revenue Task Force handed in its report sometime in September. But there were also the Governance and Control and the Refineries Task Forces which have all sent in their draft reports."

She further said: "We have set up a team that is looking at them across the board to see if there is a difference in opinion or a difference in perspective. This team will complete its work and submit a comprehensive report in the next 10 days. It is only after then that government will talk about implementation and the issues that you mentioned would be addressed.

The minister told the news agency: “Government will decide on where to draw the line on any issue that is not in conformity with its policies. And some of the points that have been raised are, in fact, not as they have been presented.

“I am very careful not to comment on the report until it has been finalised. There are areas that have already been handled by these committees because they are not the way they were presented. That is why I’m very careful not to comment before we finalise.”

The minister also added that there were some “areas that I thought should be addressed because they come up very often in the media, such as the issue of discretionary awards. I have not given any discretionary award since the inception of this administration.

“What normally happens with discretionary awards is that they are part of marginal or major bid rounds. It is in the president’s power by law to grant discretionary awards or to go with competitive bidding or to go with a mixed bag when you have a bid round, and it is entirely up to him to decide which way to go.

“When the next marginal or major bid rounds will be done, they will be publicly announced. We do expect that within the next couple of months, the marginal bid rounds will be announced. We hope that the major bid round will follow before the end of the year.”