This Day (Lagos)

Nigeria: Trafigura, Televeras, Aiteo, Ontario Named in Oil Swaps

As the public continues to digest the revelation by the Central Bank of Nigeria (CBN) Governor, Sanusi Lamido Sanusi, that the Nigerian National Petroleum Corporation (NNPC) has failed to remit an estimated $49.8 billion to the Federation Account over a 19-month period, it has emerged that part of the revenue shortfalls arising from the oil sector have been traced to the crude-for-products swap deals.

However, NNPC has dismissed the notion that billions are being siphoned through the crude oil swaps, stating that there is a misconception of the current Offshore Processing Arrangement (OPA) it has in place with overseas refiners, which it stated has saved the corporation and country billions of naira.

Crude oil swaps were introduced under the General Sani Abacha administration when the country's four refineries, owing to poor maintenance and mismanagement, were unable to function at full capacity to meet domestic fuel requirements.

As a result, NNPC commenced the swap programme under the offshore processing arrangement with overseas refiners such as those belonging to British Petroleum (BP), which enabled the corporation to export part of its refining allocation of 445,000 barrels to overseas refiners in exchange for petroleum products.

Under the arrangement, NNPC started off by appointing international commodity traders such as Vitol, Trafigura and Addax, among others to lift Nigeria's crude oil and import petroleum products. But in recent years, just like the crude oil term contracts, the swaps have become increasingly opaque and have been blamed for the revenue shortfalls experienced by the federation.

Describing how the country is shortchanged through the swaps, an industry source told THISDAY that the commodity traders appointed by NNPC to lift its crude under the swap programme have found avenues to shave off billions through subterfuge.

"What happens is that when crude oil is allocated to the oil traders, instead of selling it immediately at the prevailing market price, they sit on their allocations for several weeks, sometimes months, until the price of the commodity drops, then they buy products mostly from refinery gates at a high premium and import into the country.

"By importing fuel products on behalf of NNPC at a high premium, the corporation is compelled to pay more for the products than the crude oil equivalent than they were allocated and this makes its way into private pockets," the source explained. The source added that another avenue the oil traders were exploiting Nigeria was the lack of proper metering and monitoring of how much crude oil is actually lifted from Nigeria's oil export terminals

"This happens when a trader is given an allocation of say 30,000 barrels per day (bpd) to lift Nigerian crude for export in exchange for products, but goes to the terminal with a larger vessel that can carry 40,000bpd, and so ends up lifting 35,000bpd. "The extra 5,000bpd is then sold and ends up in the bank accounts of the trader and others who have colluded with him to siphon Nigeria's crude oil illicitly. This is tantamount to stealing and is part of the crude oil theft that we keep shouting ourselves hoarse about," he said.

The source revealed that companies lifting Nigeria's crude oil under the swap deals include Swiss oil trader, Trafigura Beheer BV, which has an allocation of 60,000bpd.

Similarly, another 60,000bpd is exported to Société Ivoirienne de Raffinage SA (SIR) under a crude-for-products deal, with Sahara Energy acting as the intermediary. The deal enables Sahara Energy import petrol and kerosene on behalf of NNPC. In addition, some 100,000bpd is allocated to Duke Oil, a subsidiary of NNPC, which reallocates the crude oil in smaller tranches to local oil companies under another swap deal.

Companies that have been nominated by Duke Oil to lift its allocation are Televeras an oil gas company run by Mr. Igho Sanomi, Aiteo which is owned by Mr. Benedict Peters; and Ontario Oil & Gas Limited, whose chairman, Mr. Walter Wagbatsoma, is standing trial for subsidy fraud.

However, there is no direct evidence linking any of these companies to oil theft. But NNPC has refuted the allegation that the current crude oil swaps are used to siphon billions, stating that the offshore processing arrangement it presently has in place has enabled the corporation to get higher volumes of products imported on its behalf at a lower cost.

An official of the national oil company blamed the vested interests in the industry who have thrived on lies about the swap programme in order to give NNPC a bad name.

He confirmed that the international commodity traders such as Trafigura, Vitol, Addax and others were given free reign for several years and were for a long time the primary lifters of NNPC's crude oil under the swap deals. "This was when NNPC operated an open account which allowed us to allocate crude oil to the traders and they imported on our behalf on credit.

"But by 2010/2011 we had accumulated a debt of $3.2 billion, which you are aware we had to borrow from overseas banks to repay the traders who were on our neck and threatening to sue us and freeze our assets.

"Also, these traders used to sit on the allocations for months and wait for the price of crude oil to fall, then they imported products at a very high premium of as much as $116.50 per five metric tonnes; this was despite the weighted average we had given them on the price NNPC was prepared to pay for the products," he said.

The NNPC official pointed out that it was as a result of the corporation's dissatisfaction with the deal it was getting from international oil traders that prompted it to seek the approval of the late President Umaru Musa Yar'Adua to commence the new offshore processing arrangement.

"Under the previous arrangement, NNPC was spending as much as $116.50 for five metric tonnes as premium which was costing the corporation some $600. As such, we could end up paying $18 million for a cargo of petrol of 30,000 metric tonnes. "However, when Yar'Adua gave us approval to start the new OPAs, by 2011 the premium had dropped to $80 per 5.5 metric tonnes, which comes to $440 or $13.2 million per cargo," he said.

He explained that the premium comprises the financing cost, freight, insurance, demurrage and marketer's margin that is paid over and above the price of petroleum products as determined by Platts.

Since NNPC must pay this premium, he added, "It is in our interest to get the best lowest premium possible for the corporation.

"It was on this basis that the Minister of Petroleum Resources said enough of this and reviewed the swaps to empower local oil companies such as Aiteo, Televeras and Ontario to bring products at a lower premium. It was only Trafigura that was retained."

He maintained that it was those who had lost out of the previous arrangement that had been spreading false stories about the crude oil swaps to run down NNPC.

One of the operators also said that the allegations that they steal crude oil is borne out of pure envy, saying that when foreigners were doing the crude swaps, nobody complained, adding, "Now that Nigerians are involved, losers are complaining."

He said that Nigerians' involvement is part of the spirit of the Local Content Act, which the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, has introduced to empower Nigerians, but instead of praising her, she is being villified. He added that the efficiency and ingenuity of her management of the crude oil swaps have not only saved the country billion of dollars, it has ensured that the country is wet with petroleum product all year round.

He asked, "When foreigners were doing the swaps, didn't we have long petrol queues all over Nigeria? Do we have them now? Instead of condemning us, they should be congratulating us."

In a related development, the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, yesterday laid to rest the raging controversy over the allegedly missing N500 billion Subsidy Reinvestment and Empowerment Programme (SURE-P) funds, saying it was shared by states and local governments.

The minister also dismissed claims by the CBN governor who had in a letter to the president raised the alarm over $49.8 million which had not been repatriated by NNPC into the Federation Account, saying the sum was intact. Okonjo-Iweala made this disclosure yesterday while briefing the Senate Ad hoc Committee on SURE-P, but did not give a detailed account of the unremitted $49.8 billion.

On SURE-P funds, Okonjo-Iweala put the total subsidy funds realised between February 2012 and September this year at N816 billion, saying of the entire sum, N300 billion had been remitted to the SURE-P account at the federal level, while the N500 billion went to states and local governments during the period.

But the Senate Committee on SURE-P disagreed with her on the formula used to arrive at the N15 billion monthly remittance of the funds and queried the minister for remitting what it perceived as flat rate every month to the SURE-P account, given that proceeds from the sale of petrol is not stable.

It also criticised the minister's disbursement of the controversial N500 billion to states and local governments, alleging that it was the reason the programme had not achieved the desired results. Okonjo-Iweala, however, challenged the committee to invite specific government agencies which it felt had failed to effectively implement any aspect of the programme well.

She argued that the programme had lived up to its purpose notably in the areas of quality healthcare provision to children, pregnant women and nursing mothers. She added that some of the proceeds of SURE-P had been deployed for rail rehabilitation, road reconstruction, and graduate employment with 2,000 interns on its payroll.

She also disclosed that corporate organisations had already begun to partner the Finance Ministry on the scheme, saying they had been asked to employ almost 600 beneficiaries. "The programme is achieving the desired results. There is no missing money and the balance of the N500 billion had been shared to states and local governments.

"For the avoidance of doubt, the figure has already been published, we need to understand the basis with which the calculations were done. We are in a federation. The states should answer questions on the N500 billion already shared to them," she insisted. But the committee faulted the remittance of some of the SURE-P funds to the stabilisation account and for ecological purposes, which it described as cumbersome.

But the minister disagreed, saying, "Every single naira of the fund was intact," and promised to handover the graduate scheme to the Labour Ministry as soon as the scheme matures.

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