Audit queries `missing` N162bn in oil sector


As the Federal Government perfects plans to borrow $500 million Development Policy Credit from the World Bank, top government officials and oil companies operating in the Niger Delta region may have failed to account for twice that amount or N162.307 billion.

A team of accountants and tax experts assembled by THISDAY to scrutinise the 2005 oil and gas industry audit report just released by the Nigerian Extractive Industry Transparency Initiative (NEITI) returned this verdict in their submission.

A breakdown shows a discrepancy of $1.091 billion or N162 billion (converted at N148.75/$) has five components: petroleum products imports ($544.296 million), share of NLNG profit for 2005 ($207.00 million), royalty ($164.265 million), Petroleum Profit Tax or PPT ($91.076 million) and reserve addition bonus ($84.502 million).

According to the team of experts, the Hart Group that conducted the audit confirmed on page six of its report that total petroleum products imports in 2005 was 5,901,879 metric tonnes (mt) of petrol (premium motor spirit) and kerosene (DPK) and AGO.

However, records the Nigerian National Petroleum Corporation (NNPC) deposed to on oath show that the national oil company paid for 6,739,257 mt of petrol, kerosene and AGO in 2005.

This means that the country was forced to pay for 837,379 mt of products not supplied. At an average price of $650.00 per mt, the country was allegedly fleeced by $544.296 million or N80.964 billion.

“The quality of data the Petroleum Products Marketing Company (PPMC) is questionable,” the Hart Group reported, adding that “measurement practices are not consistent or in accordance with international best practice”.

The auditors said: “PPMC provided several successive sets of figures and appeared not to have a definitive position.” Federal Government's share of profits in respect of its equity holding in Nigerian Liquefied Natural Gas (NLNG) in 2005 was $207 million but Hart Group stated that “NLNG reported having paid US$207 million in dividends, interest and loan repayments to NNPC but NNPC has not confirmed having received it”.

The next discrepancy arises from royalty payments by the oil companies. The Central Bank of Nigeria (CBN) could not confirm receiving royalty payments by the Nigerian Petroleum Development Company (NPDC), a subsidiary of NNPC, amounting to $90.147 million and another $74.118 million paid by Continental which delivered 13.2 million barrels of crude into terminals in 2005.

These add up to $164.265 million which the two companies claimed to have paid according to the templates they returned to the auditors.

The fourth area of discrepancy is PPT amounting to $91.076 million. Several of the oil companies claimed in returns to the auditors to have paid royalties that CBN could not confirm receiving.

A breakdown showed that Phillips Oil claimed to have paid PPT of $61.200 million that CBN could not confirm. Others are: Continental ($20.725 million), Chevron/TOPCON ($5.825 million) and Pan-Ocean ($3.326 million).

The Hart Group confirmed at page seven of their report that companies did not report Reserve Addition Bonus (RAB) which was discontinued by NNPC in 2002 but on the following page the audit group stated that NOAC included RAB of $57.942 million in its returns.

Similarly, the auditors appear to have missed out on payment of RAB of $91.852 million being refund of RAB claimed in excess of entitlement for the period 1997-1999 by Chevron.

THISDAY is in possession of a letter dated 29th November 2005 by which Chevron made the payment to Federal Inland Revenue Service (FIRS).

The two payments on RAB amounted to $149.794 million but Hart Group recorded another RAB payment of $65.292 million that is unattributed. This reduces the loss to the Federation Account to $84.502 million.

The 2005 audit of the oil and gas industry is being released over two years after it was conducted. Another audit covering 2006-2009 has just been commissioned.