Adio: Nigeria Does Not Have Independently Verifiable Metering Infrastructure for Oil Production Figures
The Nigeria’s extractive industry, over the years, has not been able to deliver the benefits to the people deservedly, owing to its opacity and corruption. However, the advent of NEITI has changed the narrative, opening up the industry and enforcing discl
There is a common notion and it has become a worrisome fact that Nigeria does not know how much crude or the accurate figures of crude that is pumped; it’ s even more worrisome that the I O Cs are the ones giving whatever figures that are out there as the official figures because they’ re the ones that have the instruments for measurement-they dictate to D PR what the figures are. Is NE IT I not worried that the federal government does not have control over the amount of crude that is pumped? Has NE IT I ascertained the correct figures?
This is an issue that should bother all Nigerians, not just NEITI. And this is not simply because of the right, the need and the duty to know, but more because of the wider revenue, welfare and security implications. The very first NEITI audit report flagged this issue. The NEITI audit report for 1999 to 2004 stated unequivocally that, Nigeria knew only the volume of oil it was selling, not the exact volume it was producing, that we did not have a comprehensive and independently verifiable metering infrastructure in place, that we depended only on the say-so of the operators for our production figures. More than a decade after that first report was released, and despite that NEITI consistently flags this issue in report after report, nothing much has changed. At some point, DPR said it had ordered operators to install multi-phased meters not just at the point of custody transfer and at the terminals but also at the well-heads and the flow-stations. That is yet to be done. The operators always say they
are ready once government decides on how to proceed and the issue of how to handle the cost is sorted. We believe them. So the government, as the sovereign, should decide on what next. We are losing a lot to theft and vandalism. According to NEITI audit reports, the value of federation share of crude oil lost to theft and deferred production on account of sabotage was $16.7 billion between 2009 and 2013. As I have said repeatedly, these are losses at almost industrial scale. Imagine the difference that the money could make to all tiers of government and to welfare of citizens. Imagine also the security implications for the country. The House of Representatives is investigating an issue of stolen crude amounting to over $17 billion between 2011 and 2013. This is the value of the discrepancies between what vessels declare to our authorities here and what they declare as originating from Nigeria at their destinations. So we need to sort out not just the issue of metering but also effective monitoring of our oil assets from end-to-end. I am sure you have seen that CBS clip of the command centre of Saudi Arabia’s ARAMCO where they can monitor and account for every drop of crude oil in their country. There is no point why we should not have such. NEITI is doing a comprehensive study on this metering issue. We will continue to talk about it until action is taken. But this is an issue for all Nigerians, not just for NEITI alone.
Over the years, there were cases of missing billions of Na ira in crude oil revenues that came in through N NP C asa result of discrepancies in the figures between the corporation and Revenue Mobil is at ion Allocation and Fiscal Commission and later between the corporation and the CB N led by the former governor, now Em ir of Kano, Sanusi Lamido Sanusi. Have these discrepancies been resolved? Is NE IT I on the same page with N NP C in terms of oil revenue accruing to the treasury?
Our work is actually about ensuring there are no discrepancies between payments by companies and receipts by government. If you have followed our more than dozen audit reports, you will notice massive improvement in level of discrepancies. But this does not mean there are no outstanding issues. You will recollect that we published a policy brief in March on monies unremitted or owed by NNPC and its subsidiaries, particularly NPDC, totaling $21.8 billion and N316 billion. We published the breakdown, ranging from NLNG dividends of $15.8 billion between 2000 and 2014, the consideration for 12 federation assets divested to NPDC from the Shell JV and the NAOC JV, NPDC’s legacy liabilities, refund of cash-calls mistakenly paid on divested assets, and outstanding refund from domestic crude sales. We are aware that some people in NNPC are not happy that we are raising these issues. But our job is not to make people happy. We have been accused of naivety by and obsession with NNPC. But it is not about us or even about the people attacking us. By the way, such attacks go with the terrain. Attacks on NEITI used to be more pronounced, more direct, and more aggressive because they knew they had political cover. As I was saying, we need to focus on what this is about. It is about our country and our common wealth. It is about doing right by our country and our compatriots. It is about ensuring that things are done properly. It is not personal and should not be personalised. Some of these issues are legacy issues; they did not happen under the current management of NNPC. But an institution is a continuum. We need to come to closure on the outstanding issues and ensure that we have a robust mechanism to prevent relapse. It is possible some issues have been addressed, that some refunds already made. It is possible we are not right in every material particular. We look forward to sitting down with the affected agencies to iron out the issues. The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has offered to get all the parties to sit to look at all the issues. We thank him for the initiative and we look forward not just to the meeting but also to a comprehensive resolution of the issues. Our job is to resolve issues. We also think the onus is on those managing public resources to give account publicly. NNPC has started doing that, and we have commended them for it. We look forward to the day our reports will not have question marks about past or present issues in NNPC. But until then, I am sorry, we cannot look the other way.
Could you rate the transparency levels of the N NP C in its transactions and operations -D SD P, JV cash call exit, etc? Have they met certain transparency marks you expect?
As I said earlier, there is a new spirit in NNPC. They open up more. They cooperate more. They engage more. You could also sense an attempt to take corrective measures. The DSDP, direct sales direct purchase, was introduced to address the opacity and losses around Offshore Processing Arrangements (OPA) and Product for Oil Swap. NEITI’s 2013 audit report showed that Nigeria lost $518 million to OPA and SWAP. So it is good that DSDP has been introduced to address such uneconomical arrangements that we got into because of the state of our refineries. It is also good that an attempt is being made to address the issues around cash-calls. But on both DSDP and the reported cash-call exit, there is need for more information about the details of these arrangements. Without enough details, it is difficult to comment on these issues in an informed manner. But having said that, we are impressed with NNPC’s monthly disclosures. The same NNPC that used to be the very definition of opacity is opening up, doing pro-active disclosure and on a monthly basis, and is even far ahead of us in terms of period covered. We welcome that. But we also call on Nigerians to take more interests in the disclosures and interrogate the data. We did a joint report with BudgIT on a year of NNPC’s disclosures. BudgIT also tracks the disclosures month to month. We need to encourage NNPC to do more by giving them feedback on the disclosures and showing there is active demand for that important stream of work.
Is NE IT I involved in any of the oil sectorrelated probe sand prosecutions, and to what extent,ifatall?
Yes, to a large extent. We have been approached for invitation and interpretation by both the executive and the legislative arms. In fact, we are constantly deluged with requests by the National Assembly. We spend a significant amount of time responding to their requests or appearing before them. We welcome this. We need the legislative arm to be more engaged to be able to perform its oversight, legislative and representative functions better. Also, we are consulted for information and clarifications on most of the prosecutions going on around issues in the oil and gas sector.
NE IT I has in addition to its annual audit reports, included quarterly reports of extract ive industries expenditure and earnings-these are lots of information, yet the industry is still challenged with transparency as recently confirmed by Minister IbeKa chi k wu. Are you bothered about this?
Yes, we are. But we also have to acknowledge that there is a sense of progress. We would love the changes to be faster and better institutional is ed. It also depends on your preferred mode of change. Do you subscribe to the big-bang theory or to the incremental theory? I think it will be unrealistic to think the desired state will come overnight. And if it happens overnight, it is probably not sustainable. At the same time, if you opt for the gradualist approach, you need to ensure that you are building on and sustaining the gains. Change is going to be a work in progress, but you need to ensure that there is both work and progress. To go back to your question, it is precisely because we have not had as much progress as we want that we asked ourselves what we need to do differently and what new things to take on board. We have a new strategic plan now. And as part of that plan, we made the deliberate decision to play more in the policy space. That is why we have introduced the quarterly review that you mentioned but also the policy brief and the occasional paper series. We still do our audits. But in addition to the audits, we have created these three policy instruments that allow us to focus on critical issues around prudent, optimal and accountable use of our extractive resources.
There is still a lot of work to do in accounting for operations in the solid minerals sector, NE IT I seems not very up beat on this, and this is a sector that is easily accessible to average Nigerians. Why is this so? Are you lacking capacity for proper accounting for the sector?
We have actually been focusing on the solid minerals sector. We have done five audit reports on solid minerals. We usually present the reports together with the oil and gas reports. It is understandable if people miss them because of the amount of money involved and the low contribution of the sector. We have always advocated that Nigeria should focus more on the solid minerals sector because of the potential of the sector for job and wealth creation and diversification of our export, revenue and forex base. We have always made recommendations about what needs to be done