A civil society group focused on transparency in the oil and gas sector has criticized the interim Offshore Processing Agreement, OPA, between the Nigerian National Petroleum Corporation, NNPC, and three multinational trading companies to boost the supply of refined petroleum products in the country.
The Africa Network for Environment and Economic Justice said the process of engaging the companies fell short of the provisions of the Nigeria Extractive Industries Transparency Initiative (NEITI) Act 2007.
The agreement, which NNPC described as a stop-gap products supply arrangement expected to run for three months, involves Duke Oil, an international partner of the NNPC engaged in direct oil trading activities in the spot market, and its long-standing international trading partners, Carlson and Napoil.
The NNPC’s public affairs manager, Ohi Alegbe, said on Wednesday the deal was part of the corporation’s effort to ensure sustained and unimpeded supply and distribution of petroleum products nationwide.
Under the agreement, Mr. Alegbe said, NNPC was obliged to allocate a certain volume of crude oil within the period for refining at offshore locations in exchange for petroleum products at pre-agreed yield patterns.
The corporation explained that the temporary OPA package would lapse with the advent of the new contracts expected to come into effect at the end of the ongoing public tender process.
“The process of engaging the three companies was not open and competitive and did not take into account civil society observations espoused in NEITI Act and other statutes enacted to mainstream transparency and accountability in Nigeria’s extractive industries” said Mr. Ugolor of the Africa Network for Environment and Economic Justice.
He said the two Swiss commodity trading firms – Carlson and Napoil – are international trading affiliates of Vitol and Trafigura, long-standing joint venture companies of NNPC, who were indicted in the Bern Declaration Report of 2013.
The report by the Swiss non-governmental advocacy organisation, titled, “Swiss Traders’ Opaque Deals in Nigerian”, detailed how the NNPC connived with major Swiss oil trading companies to siphon billions of dollars of revenue from Nigeria through the sale of crude oil below the market value.
The Berne Declaration, which described the Nigerian oil scam as the greatest fraud Africa has ever known, said Nigerian and foreign fuel importers used their offshore subsidiaries, working with politically exposed fraudsters, to swindle the country of over $6.8 billion in phantom subsidy payments to non-existing importers between 2009 and 2011.
The report had identified seven major oil marketers and fuel importers, including the two Geneva-based commodity trading firms, as working through their shell companies in Switzerland and notorious offshore tax haven of Bermuda to defraud Nigeria of billions of Naira in tax earnings.
“Vitol and Trafigura alone took, respectively, 13.44% and 13.49% of Nigerian crude oil exports in 2011 for a cumulative value of 6.7 billion dollars,” the report said.
Mr. Ugolor said Nigerians were worried that the two firms still outclassed their competitors to emerge in highly opaque partnerships with the NNPC.
“We observe that the interim crude swap agreements contrast sharply with President Muhammadu Buhari’s agenda, and his determination to rid the country’s oil and gas industry, and indeed all sectors of the economy, of corruption responsible for the hemorrhaging of the nation into frightening poverty,” the ANEEJ boss said.
He recalled that NNPC had assured Nigerians that the number of off-takers would be pruned to only 16, from the existing 43 firms for the 2015/2016 annual crude oil term contract, to instill probity in the award process.
Mr. Ugolor welcomed the decision to prune the number of off takers, saying NNPC must take immediate steps to end all oil swap arrangements in the country as it has turned out to be an avenue for oil theft and bleeding of the economy.
“The best measure to optimize the marketing of Nigeria’s crude oil and secure new market potentials is not to embark on oil swap deals, but to ensure local refining of the crude and market the refined products both locally and internationally,” Mr. Ugolor said.