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Investigation into Nigeria’s oil losses stirs controversy

Sapa-AFP Lagos

A probe alleging Nigeria has lost out on tens of billions of dollars in recent years through questionable practices in Africa’s biggest oil and gas industry has stirred controversy and calls for action.

A petrol attendant sells fuel to motorcycle taxis at a Total petrol station in Lagos, Nigeria, Monday, Nov. 19, 2012. French oil company Total SA said Monday it had sold its stake in an offshore oil field near Nigeria for $2.5 billion to the Chinese state-run firm Sinopec Corp., a sign of the China's growing stakes in the West African nation's oil production. (AP Photo/Sunday Alamba). Credit: AP

The report from a government-appointed task force has not been officially made public, but leaked copies have generated strong responses from officials, the state oil firm and private companies, which dispute many of its findings.

Anti-corruption activists seeking changes to an industry that operates with little transparency and has long been seen as awash with graft have, however, sought to pressure the government into addressing the alleged problems.

The 139-page report is a rare look at the inner workings of an industry that provides Nigeria with more than two-thirds of government revenue and nearly all its export earnings.

It alleges that Nigeria’s government has been shortchanged billions of dollars due to issues including unpaid royalties, exchange rate disparities and theft.

It questions Nigeria’s bidding process that grants licences to oil producers as well as the practice of using private traders to act as middlemen in certain aspects of the industry.

Some examples of the amounts the report says Nigeria has lost or is owed include:

n $29 billion (R257bn) due to what appeared to be lower-than-usual prices for gas sales to Nigeria Liquefied Natural Gas (NLNG), whose shareholders include Shell, Total, ENI and state oil firm Nigeria National Petroleum Corporation (NNPC);

n More than $6bn a year due to oil theft. The report says there is evidence members of the security forces profit from it;

n $4.6bn due to discrepancies in domestic crude sale prices;

n $3.03bn in unpaid royalties,

The findings are based on an industry review for 2005 to 2011, although some data goes back to 2002. The NNPC disputes much of this, saying there are major flaws in calculations alleging price discrepancies, exchange rate disparities and losses linked to gas.

The state firm argued that it had presented its analysis to the task force.

“We therefore question the basis of the decision of the task force to ignore this information and data, which would have ably assisted it in arriving at verifiable conclusions and recommendations without misleading the public as the report clearly did,” it said.

Royal Dutch Shell also refuted findings that it owed Nigeria for gas produced at its offshore Bonga field.

“That allegation is incorrect but we cannot comment further as we do not know the basis of the calculations that yielded the $947m number,” it said in response to questions.

Concerning sales to NLNG, Shell said an analysis based only on end-user prices would be wrong since it did not consider costs related to transport and processing.

Italy’s ENI referred questions on that specific matter to the NLNG venture, which issued a statement disputing the findings in line with Shell’s.

The report was presented to President Goodluck Jonathan, who has appointed a committee to study it.

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