Lagos — Nigeria lost out on tens of billions of dollars in oil and gas revenues over the last decade from cut price deals struck between some multinational oil companies and government officials, a confidential report says.
A team headed by the former head of the Economic and Financial Crimes Commission, EFCC, Nuhu Ribadu, produced the 146-page study on an oil ministry request. It covers the year 2002 to 2011.
Nigeria is Africa's largest crude oil exporter, shipping more than two million barrels per day (bpd), and is also home to the world's ninth biggest gas reserves and one of the largest Liquefied Natural Gas (LNG) export terminals.
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 people live in poverty.
Oil Minister, Diezani Alison-Madueke told Reuters on Tuesday she had received the report last month but that it was a draft and the government was still supposed to give input. The one seen by Reuters was labeled "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.
"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 international oil traders sometimes buy crude without any formal contracts, and the state oil firm had short-changed the Nigerian treasury of billions of Naira 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 is a draft," Alison-Madueke said. "There will be some areas where the government ... may have a slightly different opinion ... (and) will put its point of view to the committee."
She said she expects the final report to be with President Goodluck Jonathan within two weeks.
Ribadu's probe was among several set up following a week of nationwide strikes against a rise in fuel prices in January, which morphed into a campaign against oil corruption.
Billions of dollars of revenue was missing in unpaid debts from signature bonuses and royalties, the report found.
Oil firms pay at cut-down prices
Nigeria LNG, a company 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 said.
Total and Eni declined to comment because they invest in but do not operate Nigeria LNG, the role played 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 the Nigerian 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 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.
Nigerian oil ministers between 2008-2011 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 were that parts of NNPC be reorganized 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.
Strangely, none of the oil companies mentioned in the alleged fraud responded to their calls, and the NNPC which "responded' did not say anything different from the minister. Even members of the committee could not comment.
In a swift reaction on behalf of the minister, the NNPC forwarded excerpts from the minister's interview with Reuters, which read:
"Minister: The report is not normally put in the public domain until the government's complete report is finalized. 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.
"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 will be addressed. 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 you have raised are, in fact, not as they have been presented. I am very careful not to comment on the report until it has been finalized. 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 finalize. There are 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."
The statement, signed by the NNPC spokesman, Fidel Pepple, titled: "Petroleum Minister Clears Air on Committee Report .... Says It Will Be Ready Soon," did not clarify issues raised by Reuters.
Members of the committee included a former Head of Service of the Federation, Mr. Steve Oronsaye, deputy chairman.
Other members are, a Director of Mobil Oil Nigeria Plc, Mallam Abba Kyari; Mr. Olisa Agbakoba, SAN; Ms Benedicta Molokwu, Mr. Supo Sasore, SAN; Mr. Tony Idigbe, SAN; Mr. Anthony George-Ikoli, SAN; Dr. Omolara Akanji, Mr.Ituah Ighodalo, Mr. Bon Otti, Prof. Olusegun Okunnu, Mallam Samaila Zubairu, Mr.Ignatius Adegunle and Mr. Gerald Ilukwe.