Chineme Okafor in Abuja
The Nigeria Extractive Industries Transparency Initiative (NEITI) has stated that the Nigerian Petroleum Development Company (NPDC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC) does not have the technical competence to profitably operate the prolific oil blocks transferred to it by the NNPC.
NEITI’s Director of Communications, Dr. Orji Ogbonanya Orji, quoted the Executive Secretary of the agency, Mr. Waziri Adio as calling on the federal government to revisit and re-valuate the transfer of the oil assets by NNPC to NPDC.
Adio, who made the call when he presented the latest ‘Policy Brief’ of the agency entitled, “Unremitted funds, oil sector reforms and economic recovery,” further claimed that the NPDC has grossly mismanaged the assets and at the same time refused to open its books for audit by it.
He argued that the review has become imperative in view of the under-valuation, non-payment for the assets and the inability of the NPDC to either make returns on the investments or be accountable to the federation over its management of oil assets in its custody.
NEITI said the NPDC owed the federation unremitted sums totaling about $5.5 billion and another N72.4 billion from the oil assets under its possession.
“Beyond the issue of unremitted monies, there are issues of transparency and efficiency with the operations of NPDC. Since 2005, NNPC has transferred 16 OMLs to NPDC. However, the process of transfer of these assets raises serious questions as there appears to be no clear-cut criteria for transfer of oil mining assets to NPDC.
“The process for the transfer of federation’s assets to NPDC does not seem to pass the transparency test. One of the upshots of this is the undervaluation of these assets, thereby depriving the federation of optimal value for the assets,” said Adio in the statement.
Expressing concerns over NPDC’s technical expertise and financial capability to manage the oil assets, Adio said: “The lack of technical know-how has been evident since the mid-2000s when the NPDC started engaging in service contracts with international oil companies.
“Also, NPDC’s lack of finances has been evident since the beginning of the 2010s, when the company resorted to Strategic Alliance Agreements (SAAs) with indigenous oil companies to carry out production on the fields in its possession.”
He maintained that if NPDC was established to foster indigenous participation in the upstream sector, the company has not in the past three decades demonstrated the ability to either maximise its production capacity or show that it has the financial muscle to operate independently.
He said as regards this: “In mid-2006, total output from its wholly owned production was just 10,000bpd. On the other hand, production from its service contract agreement with Agip was 65,000bpd. Despite NPDC’s clear operational and capacity deficiencies, the company continues to be allocated valuable concessions of Nigeria’s most productive OMLs.”
The reported assets’ undervaluation, NEITI said was from NNPCs divestment of its 55 per cent shares in the Shell Joint Venture which it valued at $1.8 billion, while PricewaterhouseCoopers’ (PwC) valuation of the same assets was $3.4 billion.
“In addition, four other assets were divested in 2012 by NNPC to NPDC under the NAOC JV which the DPR valued at $2.225 billion. NPDC is contesting these valuations even though it currently operates these 12 OMLs without paying in full, the undervalued rates (paid only a $100 million) nor the new figures arrived at by PwC and the DPR. In total, the non-payment for the 12 oil blocks by NPDC sums up to $3.925 billion,” he noted.
Questioning NPDC alleged deliberate refusal to be accountable in its management of oil assets entrusted in its care, Adio said: “NPDC continues to be unaccountable to state institutions and the laws of the country”.
“NPDC has consistently declined to give account of its operations and its management of national oil assets in its possession. NPDC failed to cooperate with the forensic audit ordered by the Auditor-General of the Federation in 2015. Similarly, the company failed to cooperate with NEITI for five audit cycles and only partially cooperated during the 2013 and 2014 audits,” Adio added.