A report by the Secretary General of the United Nations on the activities of the United Nations Office for West Africa and the Sahel, UNIWAS, has said that Nigeria lost an estimated $2.8 billion in revenue due to oil related crimes in 2018.
The report, which was released in New York on Monday, covered from July 1, 2018 to Dec. 31, 2018.
The report said: “Maritime crime and piracy off the coast of West Africa continued to pose a threat to peace, security and development in the region.
“Oil-related crimes resulted in the loss of nearly 2.8 billion dollars in revenues last year in Nigeria, according to government figures.
“Between January 1 and November 23, there were 82 reported incidents of maritime crime and piracy in the Gulf of Guinea.’’
It also noted, that compared to what obtained in the previous report, there was an increase in drug trafficking throughout West Africa and the Sahel.
“In Benin, the Gambia and Nigeria, more than 50 kilogrammes of cocaine were seized between July and October by joint airport interdiction task forces.
“During the same period, joint airport interdiction task forces seized more than six kilogrammes of methamphetamines, eight kilogramme of heroin (double the amount in the first half of 2018) and 2.6 tonnes of cannabis.
“Drug production across the region was also reportedly on the rise, with more than 100 kilogrammes of ephedrine and phenacetin seized by competent authorities,’’ the report said.
The UN report further revealed that the during it covered, conflicts between farmers and herders resulted in loss of lives, destruction of livelihoods and property, population displacements and human rights violations and abuses.
It also added that outbreaks of violence were recorded in many states across Nigeria, although with more frequency in the Middle Belt region, as well as Adamawa and Taraba, adding that the rise in conflict between farmers and herders was closely linked with demographic pressures, desertification and the attendant loss of grazing reserves and transhumance routes, which had been exacerbated by climate change.
The report further identified others to include challenges in the implementation of effective land management and climate change adaptation policies, and limited enforcement of existing pastoral laws.
Political and economic interests, the erosion of traditional conflict resolution mechanisms, and weapons proliferation, were also listed as some of the other factors attributed to the increased cases of herders-farmers conflict.
Nigeria literally threw N197 billion into the flames in the first nine months of 2018, representing the value of gas flared during the period.
According to data from the Nigeria National Petroleum Corporation (NNPC) oil and gas companies operating in the country flared a total of 215.9 billion standard cubic feet of natural gas in the first nine months of 2018.
According to the data, 31.68 billion scf of gas was flared in January, 27.25 billion scf in February, 26.88 billion scf in March and 23.06 billion scf in April.
The oil and gas companies, which included international and indigenous operators, also wasted 21.20 billion scf of gas in May, 21.66 billion scf in June, 21.21 billion scf in July, 22.42 billion scf in August, and 20.54 billion scf in September.
With the price of natural gas put at $2.97 per 1,000scf as of Friday, the 215.9 billion scf flared translates to an estimated loss of $641.22m or N196.82bn at the official exchange rate of N306.95/dollar.
The NNPC data further revealed that out of the 238.91 billion scf of gas supplied in September 2018, a total of 142.09 billion scf of gas was commercialised, comprising 30.36 billion scf and 111.73 billion scf for the domestic and export market respectively.
It said: “This translates to a total supply of 1,011.96 mmscfd of gas to the domestic market and 3,724.26 mmscfd of gas supplied to the export market for the month.
“This implies that 59.47 per cent of the average daily gas produced was commercialised while the balance of 40.53 per cent was re-injected, used as upstream fuel gas or flared. Gas flare rate was 8.60 per cent for the month under review i.e. 684.69mmscfd compared with average gas flare rate of 10.17 per cent i.e. 800.59mmscfd for the period September 2017 to September 2018.”
The NNPC further said that the total gas supply from September 2017 to September 2018 stood at 3.094 trillion scf, out of which 464.48 billion scf and 1.331 trillion scf were commercialised for the domestic and export market respectively.
“Out of the 1.011 billion scfd of gas supplied to the domestic market in September 2018, about 614.55mmscfd of gas, representing 60.73 per cent was supplied to gas-fired power plants while the balance of 397.41mmscfd or 39.27 per cent was supplied to other industries.
“Similarly, for the period of September 2017 to September 2018, an average of 1.185 billion scfd of gas was supplied to the domestic market, comprising of an average of 743.85mmscfd or (62.75 per cent) as gas supply to the power plants and 441.58mmscfd or (37.25 per cent) as gas supply to industries.”
It said about 3.370 billion scfd or 90.50 per cent of the export gas was sent to Nigerian LNG Limited in September, compared with an average of 3.043 billion scfd or 89.58 per cent for the period September 2017 to September 2018.
Nigeria’s 2019 Budget may face hiccups as the current crude oil prices in the international market has fallen below the Budget benchmark.
On Monday, crude oil price dropped from $66.00 to $57.00 per barrel in the international market, indicating $3.00 below the $60 benchmark of the 2019 budget.
The price of Brent fell by as much as 4 per cent, hitting a low of $57.20 a barrel, in its third straight day of decline, while West Texas Intermediate, the US benchmark, weakened as much as 4.1 per cent to $47.84, the lowest level since September 2017.
Similarly, the price of Organisation of Petroleum Exporting Countries, OPEC, basket of 15 crudes stood at $58.24 a barrel, compared with $59.07 the previous Friday, according to OPEC Secretariat calculations.
According to reports, the situation was not anticipated as stakeholders, who rose from the recent 5th OPEC and non-OPEC Ministerial Meeting, were optimistic that stability would be achieved in the global market.
OPEC stated in a statement after its meeting in Vienna: “Following deliberations on the immediate oil market prospects and in view of a growing imbalance between global oil supply and demand in 2019, hereby decided to adjust the overall production by 1.2 mb/d, effective as of January 2019 for an initial period of six months.
“The contributions from OPEC and the voluntary contributions from non-OPEC participating countries of the ‘Declaration of Cooperation’ will correspond to 0.8 mb/d (2.5%), and 0.4 mb/d (2.0%), respectively.”
However, the current situation was said to have been fuelled by weaker oil demand amid over-supply from producing nations, currently not involved in OPEC and Non-OPEC accord.
Data from the US Energy Information Administration has shown that imports of crude oil by the United States from Nigeria has reached an all time low.
This is believed to be on account of the growing production of Shale oil in the US.
According to the data, the US slashed its import of Nigerian crude to 904,000 barrels and 1.74 million barrels in July and August respectively, down from 7.77 million barrels in June and a peak of 10.33 million barrels in February this year.
Similarly, total imports by the US of crude from Nigeria declined to 45.79 million barrels in the first half of this year from 55.78 million barrels in the same period last year.
Trade in Nigerian crude remained subdued on Thursday as a high volume of unsold cargoes kept buyers reluctant to step in, according to Reuters, while traders estimated that nearly a quarter of the December programme remained available.
Offers for Nigerian Qua Iboe and Bonny Light, two of the nation’s grades, hovered around $1.65 a barrel above dated Brent, down from $1.70 earlier last week.
It would recalled that the Director of the Department of Petroleum Resources, DPR, Mordecai Ladan, had last week lamented that Nigeria’s most valued crude oil customers have abandoned the country.
It was reported in September that the US Atlantic Coast imports of West African crude oil were expected to decline due to harsh arbitrage conditions made difficult by the large premium of ICE Brent futures over West Texas Intermediate, as well as strong premiums for WAF grades.
According to S&P Global Platts, Traders tracking these grades exported in the US expected WAF imports to the USAC to fall to virtually zero.
Nigeria has lost its most valued crude oil buyers, even as its erstwhile gas customers are now competing with it, the Department of Petroleum Resources said on Monday.
The Director, DPR, Mr Mordecai Ladan, said the oil and gas industry seemed to be under a new threat, which he described as the renewed dislike and global war against fossil fuels and the quest for renewable and cleaner energy.
“Over the years, the threat against fossil fuels had always been on paper, but today, it is more real than ever, based on some clear evidence I like to draw our attention to,” he said at the 18th edition of the International HSE Biennial Conference on the Oil and Gas Industry in Nigeria.
He said three among the biggest technology companies, including Google and Apple, had made attempts at electric cars to replace petrol and diesel engines, with that of Tesla taking the world by surprise.
Ladan said, “Not only did the first two releases of Tesla outsell sales forecasts, they were actually oversubscribed, and the demand keeps rising while new models are being added. As we speak, some of the big international oil companies here seated are funding gigantic researches into alternative fuels, which include the use of cheap, common algae.
Strengthening mechanism for increased internal revenue generation is critical to the expected increased revenue in the non-oil sector, Yue Man Lee, World Bank Senior Economist, has said.
Lee said this on Tuesday in a paper she presented at the ongoing 3-day National Council on Finance and Economic Development conference, holding in Kaduna.
The paper was entitled “Strengthening States Revenue Performance through Transparency and Open Government.’’
Lee observed that Nigeria’s revenues were very low due to contraction in oil revenues and the stagnancy in the non-oil revenues which she attributed to the absence of stable tax policy reforms and weak tax administration.
She said that with no improvement in revenue collection, total spending would decline; debt would increase while fiscal space would shrink.
The expert noted that the government could not deliver on its social and development agenda without it increasing total public spending.
According to her, the only mechanism to increase government expenditure in a sustainable way is to triple total revenue through mobilising non-oil revenue.
“However, Nigerian tax perception survey shows low tax compliance due to weak transparency and accountability.
“Corporate income tax is less than six per cent of registered taxpayers, personal income tax shrinks to two per cent, while compliance in the case of VAT varies between 15 and 40 per cent.
“This is worrisome because low tax compliance reduces states revenues and strengthening revenue and increasing expenditure efficiency needs to be underpinned by an increase in transparency and accountability.”
Lee, however, said that the Nigerian states could increase transparency and accountability to strengthen IGR through harmonisation of revenue collection and automation of tax payment.
“Kwara and Kaduna States are good example of states where such reforms were initiated with a significant increase in IGR,” she said.
Meanwhile, the Accountant-General of the Federation, Ahmed Idris, said that automated collection and management of non-oil revenue was critical to increasing its performance in revenue generation and sustenance.
The campaign group Global Witness has calculated the OPL 245 deal in 2011 deprived Nigeria of double its annual education and healthcare budget.
Eni and Shell are accused of knowing the money they paid to Nigeria would be used for bribes.
The Italian and Anglo-Dutch energy giants deny any wrongdoing.
This unfolding scandal, which is being played out in an Italian court, has involved former MI6 officers, the FBI, a former President of Nigeria, as well as current and former senior executives at the two oil companies.
The former Nigerian oil minister, Dan Etete, was found guilty by a court in France of money laundering and it emerged he used illicit funds to buy a speed boat and a chateau. It is also claimed he had so much cash in $100 bills that it weighed five tonnes.
Shell is one of the oil firms facing corruption charges
Global Witness has spent years investigating the deal which gave Shell and Eni the rights to explore OPL 245, an offshore oil field in the Niger Delta.
It has commissioned new analysis of the way the contract was altered in favour of the energy companies and concluded Nigeria's losses over the lifetime of the project could amount to $5.86bn, compared to terms in place before 2011.
Oil giants face Nigeria 'corruption' trial
New evidence in Shell corruption probe
The analysis was carried out by Resources for Development Consulting on behalf of Global Witness, as well as the NGOs HEDA, RE:Common and The Corner. The estimated losses were calculated using an oil price of $70 a barrel as a basis.
Eni has criticised the way it was calculated because it ignores the possibility that Nigeria had the right to revise the deal to claim a 50% share of the production revenues.
Deal or no deal
Campaigners say the deal should be cancelled.
"We discovered that Shell had constructed a deal that cut Nigeria out of their share of profit oil from the block," Ava Lee, a campaigner at Global Witness told the BBC's World Business Report.
"This amount of money would be enough to educate six million teachers in Nigeria. It really can't be underestimated just how big a deal this could be for a country that right now has the highest rates of extreme poverty in the world."
Nigeria is the richest economy in Africa, but despite having large resources of oil and gas millions of people are poor.
It is understandable why Eni and Shell wanted to acquire the rights to develop OPL 245, because it is estimated to contain nine billion barrels of oil.
But the process of how they secured the contract is dogged by claims of corruption.
The court in Milan is weighing evidence of how a former Nigerian oil minister, Dan Etete, awarded ownership of OPL 245 to Malabu, a company he secretly controlled.
He is accused of paying bribes to others in the government, such as former President Goodluck Jonathan, to ensure that process went smoothly.
Shell and Eni are accused of knowing the $1.1bn they paid to Nigeria would be used for bribes, claims based on the content of emails which have since emerged.
"Looking at the emails it seems that Shell knew that the deal they were constructing was misleading but they went ahead with it anyway even though a number of Nigerian officials raised concerns about this scandalous, scandalous deal," says Ava Lee from Global Witness.
The Anglo-Dutch and Italian energy giants insist they have done nothing wrong, because they paid the money to secure the exploration rights directly to the Nigerian government.
Shell issued a statement to BBC World Business Report saying: "Since this matter is before the Tribunal of Milan it would not be appropriate for us to comment in detail. Issues that are under consideration as part of a trial process should be adjudicated in court and we do not wish to interfere with this process.
"We maintain that the settlement was a fully legal transaction and we believe the trial judges in Italy will conclude that there is no case against Shell or its former employees."
Eni has also denied any wrongdoing and told the BBC that it questions the competence of the experts commissioned by Global Witness and its "partners", as well as raising the possibility that the report by the campaign group is defamatory.
Shell accused of abuses in Nigeria
The Italian oil and gas company said "as this matter is currently before the Tribunal of Milan, we are unable to comment in detail".
In a statement it noted: "Global Witness together with its partners Corner House, HEDA Resource Centre and Re: Common had requested twice to be admitted as aggrieved parties in the Milan proceedings. On both occasions, the request was firmly denied by the Tribunal of Milan."
Eni also said it "continues to reject any allegation of impropriety or irregularity in connection with this transaction".
Biggest ever corruption case
Campaigners believe this is a landmark case and the outcome of the trial in Milan will cause an earthquake to reverberate through the oil and gas industry.
Nigeria's leader is being encouraged to intervene by Olanrewaju Suraju, from HEDA. "President Buhari should reject any deal," he said.
The contrast between the way Italy deals with migrants and the actions of one of the nation's biggest companies has been raised by Antonio Tricarico of Re;Common.
"The Italian government is discouraging Nigerian migrants trying to reach Italy by claiming that it will help them at home, but Italy's biggest multi-national, part owned by the state, is accused of scamming billions from the Nigerian people."
The outcome of the unprecedented court case in Milan could force the oil industry to change how it conducts its business, especially in countries where corruption is rife, because more transparency about contracts and payments made would discourage fraud.
A New Liquefied Natural Gas plant with a capacity of 2,250 tonnes per day has been inaugurated by Greenville Oil and Gas Company Limited in Rivers State.
The plant is worth $500 million with an annual capacity of 750 million tonnes.
The Chairman, Greenville LNG, Eddy Broeke, said at the occasion: “Our mission is to bridge the natural gas supply gap in order to promote economic and social development and revive moribund industries across the country. We’ve invested about $450m to $500m on this project.
“And this is because we have to build the whole infrastructure on our own, which includes the construction of filling stations for our product on strategic locations across the country.
“Environment wise, this is going to be a full revolution, especially in transportation methods. With respect to transportation, permit me to say that what we are bringing into Nigeria and Africa is the first set of trucks that are fuelled by LNG. Normally, this should reduce the price of transportation and logistics by about 35 to 40 per cent.”
The Greenville chairman also said the product would serve electricity generation plants that found it tough to get gas through pipelines.
The Nigerian National Petroleum Corporation (NNPC) has said the Kaduna Refinery and Petrochemical Company accrued loss totalling N18.67 billion in seven months this year as it was idle for the same period.
According to the monthly report prepared by NNPC, the refinery lost N3.81bn in February, N2.63bn in March, N4.22bn in May, N2.98bn in June, N2.35bn in July, and N2.68bn in August, but made a profit of N2.96bn in April.
There are four refineries in the country with two in Port Harcourt and one each in Kaduna and Warri, with an installed capacity of 445,000 barrels per day.
The refineries have over the years performed far below installed capacity, resulting in huge imports of refined petroleum products into the country.
The refineries, according to the report, lost a total of N68.12bn in the first half of this year, making a profit of N928.81m in April, for the first time in 10 months.
Total crude processed by the refineries in August was 56,804 metric tonnes as against the 90,872MT processed in the preceding month, translating to a combined yield efficiency of 80.74 per cent as against the 73.82 per cent in July.
According to the NNPC, only Warri and Port Harcourt refineries produced 53,881MT of finished petroleum products and 8,017MT of intermediate products out of the 56,804MT of crude processed at a combined capacity utilisation of 3.02 per cent, compared to 4.83 per cent combined capacity utilisation achieved in July.
“The lower operational performance recorded is attributable to the ongoing revamping of the refineries which is expected to further enhance capacity utilisation once completed,” the corporation added.
The corporation also said it had been adopting a merchant plant refineries business model since January 2017.
It said: “The model takes cognisance of the products worth and crude costs. The combined value of output by the three refineries (at import parity price) for the month of August 2018 amounted to N8.67bn while the associated crude plus freight costs and operational expenses were N9.78bn and N9.68bn respectively.”