[FROM THE ARCHIVES] Corrupt Oil Sector: Jonathan Asks For Ribadu Report

Goodluck Jonathan

Goodluck Jonathan, former President of Nigeria

Former President Goodluck Jonathan

Ayorinde Oluokun (Abuja) First published October 29, 2012

President Goodluck Jonathan has directed that a comprehensive report of the Petroleum Revenue Special Task Force chaired by Malam Nuhu Ribadu, be presented to him this week. And his office has fixed 2 November as the date for the formal presentation of the report at the State House Abuja.

The Special Adviser to the President on Media and Publicity, Dr Reuben Abati, stated this in a statement he issued in Abuja on Monday.

Abati said the directive was in furtherance of the administration’s commitment to transparency in the petroleum sector.

The presidency’s reaction came as controversies and suspicions mounted over whether the report, already submitted to the oil minister, Diezani Alison-Madueke, would be swept under the carpet.

Abati on a radio programme in Abuja today debunked reports that government wanted to set up another committee to review the Ribadu report. He said such review would only arise after the submission of the report to the government.

The committee was set up in February to, among other tasks, verify all petroleum upstream and downstream revenues (taxes and royalties) due and payable to the Federal Government. It was also asked to take all necessary steps to collect all debts due and owed, and to obtain agreements and enforce payment terms by all oil industry operators.

Though oil minister, Diezani Alison Madueke claimed last week that she had only gotten a draft copy of the report, leaked parts of the 146 page report, tagged final, have been in wide circulation.

And what the report catalogues, does not edify Nigeria’s oil sector .

For instance, the committee has found that a total of $183m in signature bonuses paid by oil companies to the federation is missing.

The panel also found that Nigeria may also have lost $29billion in the last decade in the sweet-heart gas deals with major oil companies, such as Shell and Total, just as crude oil theft is reaching an alarming level of 250,000 barrels daily at a cost of $6.3billion a year.

The panel, set up by the oil minister, Diezani Alison Madueke, on the orders of President Jonathan, examined the oil industry between 2002 and 2012.

The report said that Ministers of Petroleum Resources between 2008 and 2011 handed out seven discretionary oil licences, but that $183m in signature bonuses was missing from the deals.

Three of the oil licences were awarded since the current minister, Mrs. Diezani 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.

Nigeria is Africa’s largest crude oil exporter, shipping more than two million barrels per day, and is also home to the world’s ninth biggest gas reserves and one of its largest Liquefied Natural Gas export terminals.

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The report provides new details on the nation’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.

Oil Minister Diezani Alison-Madueke told Reuters last week she received the report just last month, some months behind schedule but that it was a draft and the government was still supposed to give input. However, the one seen by Reuters was labelled “Final Report.”

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, it said.

“It said the gas revenue losses accrued in dealings with Nigeria LNG (NLNG), a company owned by the parastatal Nigerian National Petroleum Corporation, as well as Shell, Eni and Total. The price at which feedstock gas was sold to the NLNG “seems too generous, compared to prices obtainable on the international market”, the report said.

“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.”
Shell said the company could not comment as it had not yet seen the report. Total and Eni, which are both investors but not operators of NLNG, also declined to comment.

The report alleges international oil traders sometimes buy crude without any formal contracts, and the state oil firm had short-changed the Nigerian treasury billions 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 in a nation rife with graft.

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.

Shell owes Nigeria’s government 137.57 billion naira ($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 probe also said 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 said.
But Alison-Madueke disputed this, saying there are no informal contracts and there is “an official tender put out every year”, which can be seen by the public in newspapers.

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

“NNPC buys at international rates,” Alison-Madueke retorted.
The report said the NNPC made 86.6 billion naira over the 10-year period by using overly generous exchange rates in its declarations to the government. There was no sign of the money.

Among the report’s recommendations were that parts of NNPC be reorganised or scrapped, an independent review of the use of traders be set up and a transparency law 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.

Ribadu’s probe was among several committees set up following a week of nationwide strikes against a rise in fuel prices in January, which morphed into a campaign against oil corruption.