NNPC FORENSIC AUDIT REPORT BY PwC
REPORT ON THE INVESTIGATIVE FORENSIC AUDIT INTO THE ALLEGATIONS OF UNREMITTED FUNDS INTO THE FEDERATION ACCOUNTS BY THE NNPC
• Total gross revenues generated from FGN crude oil liftings was $69.34bn and NOT $67 billion as earlier stated by the Reconciliation Committee for the period from January 2012 to July 2013.
• Total cash remitted into the Federation accounts in relation to crude oil liftings was $50.81bn and NOT $47bn as earlier stated by the Reconciliation Committee for the period from January 2012 to July 2013.
• NNPC has provided information on the difference leading to a potential excess remittance of $0.74 billion (without considering expected remittances from NPDC). Other indirect costs of $2.81billion which were not part of the submission to the Senate Committee hearing have been defrayed to arrive at this position.
• The resulting potential excess remittance indicates that the Corporation operates an unsustainable model. Forty six percent (46%) of proceeds of domestic crude oil revenues for the review period was spent on operations and subsidies. The Corporation is unable to sustain monthly remittances to the Federation Account Allocation Committee (FAAC), and also meet its operational costs entirely from the proceeds of domestic crude oil revenues, and have had to incur third party liabilities to bridge the funding gap. Furthermore, the review period recorded international crude oil prices averaging $122.5 per barrel (Average Platts prices for 2012). As at the time of concluding this report, international crude oil prices average about $46.07 per barrel2, which is about sixty two percent (62%) reduction when compared to the crude oil prices for the review period. If the NNPC overhead costs and subsidies are maintained (assuming crude oil production volumes are maintained), the corporation may have to exhaust all the proceeds of domestic crude oil sales, and may still require third party liabilities to meet costs of operations and subsidies, and may not be able to make any remittances to FAAC.
• We therefore recommend that the NNPC model of operation must be urgently reviewed and restructured, as the current model which has been in operation since the creation of the Corporation cannot be sustained.
• The report reflects the fact that $3.38 billion was spent on DPK subsidy for the review period. We also confirmed using third party vessel tracking platforms that all vessels carrying NNPC cargoes arrived in Nigeria within the periods disclosed by PPPRA.
• A major consideration centers on the ownership of oil and gas assets controlled by NPDC. Subject to additional information being provided, we estimate that the NNPC and NPDC should refund to the Federation Account a minimum of $1.48billion as summarised in the next page.
• A determination is required as to whether all or a portion of 'other costs not directly attributable to crude oil operations can be defrayed by NNPC.
• $0.98 billion over claim of subsidy by NNPC
Our review of the subsidy documentation revealed that the subsidy due to NNPC between January 2012 and July 2013 on PMS and DPK import was $8.99billion compared to the $9.97 billion stated by the Reconciliation Committee. The difference was due to the following:
o Exclusion of October 2011 - December 2011 subsidy claims of $1.2billion. This does not relate to the review period of January 2012 to July 2013.
o $0.13billion increase in PMS subsidy claimed for the 19 months period. o $0.09billion increase in DPK subsidy claimed for the 19 months period
• Duplicated discharges noted in subsidy computations
Our examination of the PMS and DPK import verified by PPPRA revealed that some discharges were apparently verified and subsidy advised to NNPC more than once.
The repeated subsidy for PMS amounted to N3,709,879,190 ($23,954,796).
The repeated subsidy for DPK amounted to N6,169,502,266 ($39,836,652).
• $36.05 million over-statement in PPPRA’s PMS subsidy Payment Advice to NNPC
o Our review of the Subsidy Payment Advice sent by PPPRA to NNPC for discharges between January 2012 and July 2013 revealed that PPPRA applied the pre-2012 Ex-Depot Price (N49.51) on some discharges in 2012 instead of the approved Ex-Depot Price of N81.51.
o A total of 174,449,778 litres of PMS was affected in these PPPRA computations.
o The error in computation resulted in an over-statement of PMS subsidy by N5.6 billion ($36.05 million).
• Estimated $205 million DPK subsidy over-charge by NNPC
o Our review of a sample of the copies of the Pro Forma Invoices (PFIs) issued to the other marketers of DPK across different geopolitical zones of Nigeria, revealed that the 0ther marketers bought DPK from NNPC/PPMC prior to arrival at NNPC depot in Nigeria at N40.90.
o The marketers are thereafter required to incur the Lightering expenses10, NPA charges, Jetty Throughput Charge and Storage Charges before bringing the product into Nigeria.
o Subsidy is calculated as Landing Cost minus Ex-Depot Price;