Interpretations of the NNPC inquiry (1)

BETWEEN 1975 and 1978, the Nigerian National Petroleum Corporation (NNPC) was unable to collect 182,952,104 barrels of its programmed share of equity crude oil, expected to be produced by Shell, Mobil and Gulf. This is referred to as “deemed production” because from the operators’ viewpoint, the fault for not producing and collecting this quantity of crude was NNPC’s. Had quantity been produced and sold, Government would have earned all additional revenue of N2,503,791,264.8 billion. This, was in fact, not produced or sold. During the period covered by the deemed production, the NNPC paid its full share of the cost of operation to Shell, Mobil and Gulf amounting to N495,539,417.49 million whereas it never received its full share of the production while these operators received their full equity share.

The Tribunal recommended that the International Oil Companies (IOCs) concerned should identify the crude oil wells to be assigned to NNPC for the recovery of her “deemed production” amounting to over 182 million barrels of crude oil and to refund the money paid for the production (cash call) for the aforesaid deemed production. If such a statement had been issued during Mrs. Deziani Allison-Madueke’s tenure, no one will believe that something extraordinarily funny was not going on and that in fact that she and her coterie of special interests had not stolen 182 million barrels of crude. What is the difference here and the accusation levelled against her that Atlantic oil took 10 cargoes – unreported, uninvoiced at a time oil was $100 per barrels per day, therefore, amounting to $1 billion for each one billion barrel per shipment taken by Atlantic Oil Company. How was Mrs. Allison-Madueke’s agreement different from NNPC’s agreement with Ashland Oil?

Let’s back up a little. Mr. Justice Ayo Irikefe has revealed that it was possible for such a colossal amount of crude to be lost to Nigeria under whatever guise and for the 10Cs to claim that it was the fault of NNPC for not collecting their share. Secondly, that the cash calls do not really have a correlation to work done and a consequent benefit for the share of what was paid for.

Thirdly, there was no mechanism to have found this out within NNPC because had the Tribunal not sat, there was no way this could have been found out. Fourthly, the Tribunal is silent as to the origins of the system of “deemed production.” Fifthly, the Tribunal does not call for the system to be abolished nor does it say that it no longer existed while it did its work. Sixthly, we do not know whether the I0Cs complied with the directive to return 182 million barrels of oil.

Given the quirkiness and rickety nature of the accounts department, could this oil not be further diverted, if at all it was returned because the tribunal tells us that the Accounts Department only provided invoices when told to do so by the Marketing Department, ergo should the Marketing Department, which was found deficient, not ask accounts to produce the relevant invoices?

The sense one gets from reading the Irikefe tribunal report, and the three reports into NNPC by Price Waterhouse, Cooper’s, Lybrand and eat Marwick is that of an organisation deliberately operating to obfuscate procedure, to introduce unnecessary complexities, and thereby opaqueness into what ultimately should be a straight forward buy and sell operation so far as marketing and accounts are concerned.

“There was no independent system in existence: for collating the figures of the crude oil production anywhere; the NNPC’s corporate structure was weak. It had no management style and structure for efficiency and profitability, no effective co-ordination and control at the top.” (Such a structure is perhaps impossible in a federal character regime).

No comprehensive assessment of its operating strategy for accomplishing the general duties set out for it in the relevant laws setting up the corporation: NNPC was an ad hoc administration. It had a glaring absence of supervisory staff at all levels.

The Accounts Department was, according to the Managing Director, in “shambles”; it was “scrappy and in disarray”; Financial Management Information was not prepared by management for appraising the corporation’s state of affairs, planning, controlling and directing the corporation. Key financial positions were vacant, no corporate strategic planning; no monitoring; budgeting was a meaningless exercise as it was regularly ignored; no formalised accounting procedures, no basic integrated accounting system reflecting operational areas of responsibility. It had an unsatisfactory system in the Accounts Department, especially the preparing of invoices which could only be done at the behest of the Crude Oil Marketing Department. There were several instances of lifting without invoice or invoice prepared six or nine months after.

The Irikefe panel dealt with the perennial problems of inability to give account of what is produced in Nigeria and what is exported. They found a discrepancy of over 160 million barrels. The error was said to have been traced to four liftings in Forcados and Pennington where they recorded 93,939,700 barrels against Inspectorate’s figure of 258,849,942. Normal production at Forcados and Pennington was 750,000 barrels per day, thus in a year it should be 274,500,000. The panel “found that several tankers which collected oil had not been shown in the records. Similarly, several tankers that called at Qua Ebeo and Escravos had also not been shown on their records. Wrong transcription in the customs and excise records only go to confirm an inefficient and murky situation.

There is probably a misguided opinion that the private sector of the oil industry is more efficient than NNPC. This has yet to be proved: there are many people from the I0Cs who have been engaged in NNPC without improving the corporation because of their incompetence. The most glaring example is, of course, Mrs. Deziani Allison-Madueke. Others may include Dr. Daukoru, Aret Adams, and Mr. Amu etc. Moreover, some NNPC staff had gone to the private sector and did brilliantly, for example, Mr. Grant.
• To be continued tomorrow.
• Dr. (Ambassador) Patrick Dele Cole (OFR) is a Consultant to The Guardian editorial Board.