Implementing oil/gas audit reports crucial for Nigeria’s economic growth – NEITI

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Implementing oil/gas audit reports crucial for Nigeria’s economic growth – NEITI

Full implementation of recommendations in the Nigerian Extractive Industries Transparency Initiative, NEITI, audit reports will facilitate wealth creation, sustainable revenue flows and national economic development, Executive Secretary of the agency, Waziri Adio, has said.

Mr. Adio stated this in a paper titled, “Transparency in the Extractive Sector: Driving Wealth Creation and Sustainable Revenue as Solution to Economic Recession”, which he presented at the 3rd Annual Lecture of the Dauda Adegbenro Foundation at the University of Ibadan on Wednesday.

Looking at the rich natural resources in oil and gas as well as solid minerals, Mr. Adio lamented the paradox of the country as the world’s eighth largest exporter of crude oil, yet unable to appropriately harness the endowments to benefit the people.

Despite proven reserves of 37.1 billion barrels of crude oil and 180.1 trillion cubic feet of natural gas, Nigeria remains a net importer of refined petroleum products aimed at meeting the bulk of its local consumption needs.

In the solid minerals sector, Mr. Adio said inspite of Nigeria being blessed with large deposits of 44 different minerals across the country, the National Bureau of Statistics, NBS, said the sector accounts for only 0.12 per cent of gross domestic product, GDP and 1.45 per cent of total non-oil exports in 2015.

“Despite being a major oil and gas producing country for 60 years, it is clear we have not fully optimised and maximised the opportunities in the oil and gas value chain,” Mr. Adio said.

“Despite the well-acknowledged progress our country is making in EITI implementation, Nigeria is yet to escape resource curse. EITI has not failed us. We, especially at moments of high oil prices, failed ourselves,” he added.

Since Nigeria voluntarily signed up to the EITI in 2003 and started implementation in 2004, he said NEITI has conducted ”seven cycles of oil and gas, and five of solid minerals audit reports and one Fiscal Allocation and Statutory Disbursement Audit.”

These are in addition to the introduction of the ‘NEITI Policy Brief’, ‘NEITI Quarterly Review’ and ‘NEITI Occasional Paper Series’ in the last 18 months, to stimulate further debates and trigger necessary policy actions on prudent, optimal and accountable utilisation of Nigeria’s extractive resources.

“Our country will benefit more from faithfully implementing the recommendations of the NEITI audit reports, which are done at considerable public expense,” he stated.

Urging the government to ensure the recurring issues in NEITI’s audit reports still requiring remedial actions were addressed, Mr. Adio emphasised the need to know not just how many barrels of crude oil the country produces, ”but also the exact volume exported.”

He lamented that more than 11 years after the first NEITI report; 59 years after the country exported its first vessel of oil and 61 years after oil was discovered in commercial quantity in Oloibiri, in present Bayelsa State, the country still depended on what the operators ”say is the country’s oil production.”

Besides, on NEITI’s recommendation for multi-phased, calibrated meters at the oil well-heads, flow stations and export terminals, Mr. Adio said beyond transparency, knowing what the country produces has implications for government revenues, citizens’ welfare and national security.

“Other countries have invested not only in metering infrastructure but also in digital command centres where they can monitor the status of their oil assets in real time. We should not continue to trifle with a sector that still accounts for bulk of government revenues,” he said.

On crude oil losses due to theft and deferred production on account of vandalism and sabotage, he put the Federation share of crude oil losses at about $14.2 billion, while lost domestic crude was about $1.5 billion between 2009 and 2013.

Besides, he said, six companies also reported crude oil losses of about $4.1 billion and domestic crude loss of $100 million in 2014 alone.

He said losses associated with such arrangements as ‘product for oil swap’, offshore processing agreements cost the country about $518 million and $198.7million in 2013 and 2014 respectively, outside the loss to the infamous Strategic Alliance Agreements, SAAs in the upstream sector.

Other forms of losses he wanted addressed had to do with those associated with failure of the government to act. He pointed specifically to the failure to review the 1993 Production Sharing Contracts, PSCs as demanded by Section 16 of the Deep Offshore and Inland Basin Production Sharing Contract Act.

The said law demands that the terms of the contracts should be reviewed in ways that are economically more beneficial to the country when oil prices cross $20 in real term and 15 years after the 1993 agreements came into effect and five years subsequently.

The Minister of State for Petroleum Resources, Ibe Kachikwu, recently put the loss incurred on account of the non-review of the PSCs at $60 billion.

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