NEITI: Nigeria’s Oil Production Volume Still Unknown. Classic!

From Onyebuchi Ezigbo in Abuja,

The Nigeria Extractive Industry Transparency Initiative (NEITI) has described the records of the country’s crude production and export as unclear, saying that after 58 years of oil production, the country does not know exactly the quantity it produces.


Speaking at the presentation of a research report on the Nigeria Extractive Industry in Abuja weekend, Chairman of the Board of NEITI, Prof. Asisi Asobie, said despite all the inroads made by the country to expand operations in the oil industry, it had not been able to get operators to tell the truth about the actual oil volumes produced.


“After 58 years of producing oil, Nigeria does not know how much was being produced. It is regrettable that we have not been able to get oil companies to tell Nigerians exactly what they produce. The sector is shrouded in secrecy,” he said.


Asobie said the audit reconciliation carried out by the organisation in respect of its first and second audit report could only narrow down the discrepancies in revenue reporting to $16 million (1999-2004) and $155 million for 2005.


“About $16 million are still outstanding in the accounts of oil companies with the Central Bank of Nigeria (CBN) as missing between 1999 and 2004, while $155 million is standing as un-reconciled figures in 2005,” he said.
He said the outcome of NEITI’s financial audit had exposed certain weaknesses in the operations of the oil and gas industry, such as low revenue reporting, regulation, and accounting using the right parameter.


The Executive Secretary of NEITI, Mallam Haruna Yanusa Sa'eed, said the body was still facilitating remediation efforts aimed at getting to the root of the outstanding N654 billion unremitted revenue by Nigerian National Petroleum Corporation (NNPC).
He said representatives of the Department of Petroleum Resources (DPR) and the Federal Inland Revenue Service (FIRS) are involved in the reconciliation effort.


“In the case of NNPC, there were issues regarding withholding revenue/payments for lifting being a buyer of Nigeria’s crude oil. They were expected to pay fully for what they lifted. That payment was short and at the last count, it was N654 billion based on the 2005 audit. There was also the issue of accounting systems, funds not well accounted for.”


He said NEITI had set in motion remediation strategies and NNPC had been very supportive in the sense that “we sat down with the management of the NNPC and the group managing director and a whole presentation on the areas of such weaknesses were presented. That set the ball rolling”.


“We cannot say we have concluded because not all have come to light; not all have been addressed, but they are working. We are yet to recover anything from them in terms of money but we are working to recover our money,” he said.
According to him, NNPC had made a claim on certain aspects of the money, saying “there is an aspect of that money which is tied in subsidy and subsidy elements; totalling about over N220 billion. These have not been fully addressed and we are working on that”.


He said: “We have talked about $243 million in the areas of under-calculations in terms of royalties; about $340 billion in terms of petroleum profit tax underpayment based on the use of wrong price to determine such liabilities. There are equally issues that we are working with both FIRS and DPR to determine the net amounts payable by these companies.


“Although we are yet to recover anything from NNPC in terms of money, but efforts are still on to make such recovery almost seamless.”
Sa’eed said the parties were also considering the claim by NNPC that part of the money was deployed as subsidy for petroleum products.


The Executive Secretary said NEITI had been making steady inroads in the effort to encourage adoption of international best practices in the business of the petroleum production in the country.


For instance, he said the organisation had commissioned a study into the issue of oil metering and what is the best practice in that regard.
Complaints received by the oil companies and DPR, he said, had always been that it would not be possible to determine oil volume by just installing meters at the well head because the well head contains all the components, including water and gas.

“Because of what we hear, the complaints of the companies and the complaints of the DPR have always been that it is not possible to put meters at the well heads. Because at the well heads you have everything coming from the ground, which include water, sediments, gas and everything, there has to be a point where these things are separated before you can tell how much oil is produced,” he said.


He said inasmuch as these arguments are valid, what NEITI is asking is that “at what point do we know exactly what is being produced”.
“Even if that cannot be done, we say let it be so done that by the time it reaches the separation point, you can tell the quality of the oil. Because if you are able to determine what quantity comes out as water, how much comes out as good crude, water and other sediments then you will be able to say the quality of the well is of this capacity,” he said.