CONFIDEN TIAL DRAFT •
Deferment of Debts:
In the mid-2000s domestic crude debts were deferred repeatedly: for example, according to NEITI published reports, between 2004 and 2008 total domestic crude debts outside the 90-day credit window grew from N1.5b to N588b. Interest on debts outside the 90 day credit window, and infrequent delays sweeping payments into the Federation Account6.
As its debt position worsened after 2009, NNPC also began using the non-refined portion of the domestic crude allocation in costly ways: •
Withholding proceeds from sales of exported domestic crude oil:
This practice began ostensibly to cover fuel subsidy costs. NNPC itself has denied this publicly, but our findings per Section 1.2.4.1 above shows NNPC withheld N1.983trillion in subsidies between 2006 and 2011. •
Use of product swaps and offshore processing:
Starting late in 2010, a total of 27mbbls of non-refined domestic crude was sent for offshore processing and 6 mbbls for crude oil product exchange (2011: 24mbbls and 56mbbls respectively). The economics of these transactions are not clear and the task force was unable to deduce whether adequate value is generated from these transactions. Ultimately, this combination of deferred receivables, discretionary withholdings, and cashless contracts may constitute an unnecessary loss in revenues to the Federation.
11. Equity Crude Oil Sales 6. Overview The balance of government s share of crude oil production, after deducting domestic crude is termed equity crude . These crudes are obtained mainly from 3 types of arrangements which are: Joint operating agreements with International Oil companies. This may be modified by alternative funding arrangements or modified carry arrangements which arises 6
NNPC has acknowledged N450b worth of debt for unremitted domestic crude proceeds through end of 2009. It claims this sum represents a series of Presidential reprieves, but that it is now agreed a 32 instalment repayment plan. 66