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You are here:Home>>Archive>>Displaying items by tag: Oil and gas industry
Displaying items by tag: Oil and gas industry
Sunday, 22 September 2013 14:07

Nigeria looted oil money 'laundered abroad'

 

The proceeds from stolen Nigerian crude oil sold each year on international markets are being laundered in world financial centres, a new report says.

 

The London-based think-tank Chatham House said Nigeria's oil was being looted on an "industrial scale".

 

Africa's biggest oil producer should be more proactive in sharing intelligence so foreign governments can help crack down on the organised crime, it said.

 

Losses account for 5% of Nigeria's total oil output, the report said.

 

A conservative estimate - with 100,000 barrels a day believed to be the minimum amount stolen - lost revenues to the Nigerian government this year will be $3.6bn (£2.2bn), Christina Katsouris, co-author of the report Nigeria's Criminal Crude: International Options to Combat the Export of Stolen Oil, said.

 

"Proceeds are laundered through world financial centres and used to buy assets in and outside Nigeria. In Nigeria, politicians, military officers, militants, oil industry personnel, oil traders and communities profit, as do organised criminal groups," the report says.

 

It said that oil theft networks used foreign banks among other channels to launder or store their illicit earnings.

 

"Thieves have many ways to disguise the funds they move around the world. These include bulk cash smuggling, delayed deposits, heavy use of middlemen, shell companies and tax havens, bribery of bank officials, cycling cash through legitimate businesses and cash purchases of luxury goods," the report said.

 

People interviewed by Chatham House said other African countries, Dubai, Indonesia, India, Singapore, the US, the UK and Switzerland were possible "money-laundering hotspots".

 

"We tried to find cases of prosecution for money-laundering linked to crude oil theft and couldn't find one," Ms Katsouris said.

 

'Blood diamonds'

According to the report, interviewees said that the US, several West African countries, Brazil, China, Singapore, Thailand, Indonesia and the Balkans were possible destinations for the illicit oil.

 

"Because it's so mysterious we can't be sure that it's confined to a small narrow band of people - in fact we think that there's a very strong likelihood that it is actually going into the legal market," Ms Katsouris said.

 

The BBC's Tomi Oladipo in Nigeria says the Nigerian National Petroleum Corporation (NNPC), charged with regulating the country's oil industry, is often seen as ineffective and corrupt.

Nigeria's former anti-corruption chief, Nuhu Ribadu, agreed that the Nigerian authorities needed to do more to tackle the problem and said it was essential for them to find ways of identifying its crude oil and then tracking it.

 

"It's something similar to the blood diamonds, we need to do it with oil. You must first of all identify it as your own crude, then you will be able to follow it, then whoever buys it you can make a case against that person or the country," he told the BBC's Newsday programme.

 

People living in the oil-rich swamps and creeks of Nigeria's southern Niger Delta region are among the country's poorest.

 

The report detailed how much of the oil was stolen, saying at a local level, gangs tap pipelines or other onshore oil infrastructure, which is then refined locally.

 

But more industrial bunkering involves tapping pipelines on land, under the ground and under water, using huge large hoses to load the oil.

 

"This activity takes place both in daylight hours and at night, and is easily observable from the air or ground," it says.

 

These barges then head for the coast and their crews transfer the oil onto small tankers which go to an "international class 'mother ship' waiting further offshore".

Nigeria lost out on tens of billions of dollars in oil and gas revenues over the last decade from cut price deals struck between multinational oil companies and government officials, a confidential report seen by Reuters says.

 

A team headed by the former head of the anti-corruption agency Nuhu Ribadu produced the 146-page study on an oil ministry request. It covers the year 2002 to the present.

 

Nigeria is Africa's largest crude oil exporter, shipping more than 2 million barrels per day (bpd), and is also home to the world's ninth biggest gas reserves and one of its largest Liquefied Natural Gas (LNG) export terminals.

 

The report provides new details on Nigeria's long history of corruption in the oil sector, which has enriched its elite and provided the oil majors with hefty profits while two thirds of people live in poverty.

 

Oil Minister Diezani Alison-Madueke told Reuters on Tuesday she had received the report last month but that it was a draft and the government was still supposed to give input. The one seen by Reuters was labeled "Final Report."

 

The report concluded that oil majors Shell, Total and Eni made bumper profits from cut-price gas, while Nigerian oil ministers handed out licenses at their own discretion. This, while not illegal, did not follow best practice of using open bids. Hundreds of millions of dollars in signature bonuses on those deals were also missing, it said.

 

"We have not seen this report and are, therefore, unable to comment on the content, but we will study it if and when it is published," a Shell spokesman said.

 

The report alleges international oil traders sometimes buy crude without any formal contracts, and the state oil firm had short-changed the Nigerian treasury billions over the last 10 years by selling crude oil and gas to itself below market rates.

 

There was no suggestion that the oil majors or traders had done anything illegal, but the report highlighted a lack of transparency in their dealings in a nation rife with graft.

 

"It is a draft," Alison-Madueke said. "There will be some areas where the government ... may have a slightly different opinion ... (and) will put its point of view to the committee."

She said she expects the final report to be with President Goodluck Jonathan within two weeks.

 

MISSING BILLIONS

 

Ribadu's probe was among several set up following a week of nationwide strikes against a rise in fuel prices in January, which morphed into a campaign against oil corruption.

 

Billions of dollars of revenue was missing in unpaid debts from signature bonuses and royalties, the report found.

 

Nigeria LNG, a company jointly owned by the NNPC, Shell, Total and Eni had paid the country for gas at cut-down prices before exporting it to international markets, the report said.

 

Total and Eni declined to comment because they invest in but do not operate Nigeria LNG, the role played by Shell.

 

"The estimated cumulative of the deficit between value obtainable on the international market and what is currently being obtained from NLNG, over the 10 year period, amounts to approximately $29 billion," the report said.

 

It also said foreign oil firms had outstanding debts.

 

Addax, now a unit of China's state-owned Sinopec, owes Nigeria $1.5 billion in unpaid royalties, part of a $3 billion black hole of unpaid bonuses and royalties owed by oil firms.

 

Addax did not respond to requests for comment, but the report noted it disputes owing the signature bonuses.

 

Shell owes Nigeria's government 137.57 billion naira ($874 million) for gas sold from its Bonga deep offshore field, the report said, while oil majors owed $58 million between them for gas flaring penalties. They were also not adhering to newer higher fines.

 

The probe also said Nigeria was the only nation to sell all its crude through international oil traders rather than directly to refineries, adding that such trades were often opaque.

 

INFORMAL TRADING

 

It said some international oil traders who were not "on the approved master list of customers" had been sold crude oil "without a formal contract" so little could be obtained about the details of these deals, which can be worth hundreds of millions of dollars.

 

"This logically will serve to reduce margins obtainable on sale of crude oil," the report said.

 

But Alison-Madueke disputed this, saying there are no informal contracts and there is "an official tender put out every year", which can be seen by the public in newspapers.

 

The state oil firm gets an allocation of 445,000 bpd of crude oil to refine locally but it has been selling itself this oil at cut-down prices, a practice which cost Nigeria $5 billion in potential revenue between 2002-2011, the report said.

 

"NNPC buys at international rates," Alison-Madueke retorted.

 

The report said the NNPC made 86.6 billion naira over the 10-year period by using overly generous exchange rates in its declarations to the government. There was no sign of the money.

 

Nigerian oil ministers between 2008-2011 handed out seven discretionary licenses but there is $183 million in signature bonuses missing from the deals, the report said. Three of these oil licenses were awarded since Alison-Madueke took up her position in 2010, according to the report.

 

"I have not given any discretionary awards during this administration," Alison-Madueke told Reuters, although she added that the president had the right to do so instead of using bids if he saw fit. "That is entirely up to him," she said.

 

Among the report's recommendations were that parts of NNPC be reorganized or scrapped, an independent review of the use of traders be set up and a transparency law be passed requiring oil companies to disclose all payments made to Nigeria.

 

U.S. regulators put new rules in place in August that will require U.S.-listed oil and gas companies to disclose payments they make to foreign governments like Nigeria.

 

 

 

 

 

 

 

Oil and gas industry is large capital intensive that requires enormous resources for its finance, management and operation. The inability of local banks inNigeria and south of Sahara to finance massive oil and gas projects are not news anymore. The capitalization of banks in Africa is quite low to engage in large capital financing of oil and gas. But gradually things are changing and local banks are beginning to engage in participation of underwriting and financing   of oil and gas projects through the leverage of consortium loans.

It was widely  reported that, “la consortium of eight Nigerian banks led by UBA, as the lead bank, are in a $265million supplementary refinancing deal for ExxonMobil and the Nigerian National Petroleum Corporation (NNPC). The banks are United Bank for Africa Plc, Oceanic Bank, Standard Chartered Bank, Skye Bank, Zenith Bank, Bank PHB, Access Bank and Union Bank Plc. The deal, which was closed in London last week, marked a further sign of the increasing leadership role of Nigerian banks in oil and gas financing, where until recently they had largely played a more limited role.”

Some hydrocarbon companies with publicly traded stocks are issuing more stocks in order to raise capital in the local capital market. The growing oil and gas industries are raising money at the stock market. The West African energy giant, Oando Plc of Nigeria is set to raise the sum of 21 billion naira ($140 million) by selling shares in the capital market. The capital raised will be used to finance ventures in energy sector and "refinancing the acquisition of upstream assets, providing operational capital to fund the operation of the upstream business, and short and medium term investment in its gas and power business segment." Oando Plc headquartered in Lagos, Nigeria is the biggest indigenous energy firm in Nigeria that market oil products and involve in oil exploration at its acquired upstream assets, the segment that will receive the largest chunk of the proposed capital infusion. Oando Plc will raise the capital "through a Right Issue of 301,694,878 ordinary shares of 50 kobo each at N70.00 per share on the basis of one 1 new ordinary share for every 3 ordinary shares of 50 kobo each held as at the close of business on Friday, 18 December 2009." Two powerful and resourceful companies in the capital market: Vetiva Capital Management Ltd. and Stanbic IBTC Bank Plc will participate in the selling of the shares to raise the proposed capital.

Most of financing for the oil and gas projects are from international financial institutions particularly World Bank and International financial corporation (IFC). The Chad’s oil and gas industry was partially financed by the World Bank. But also the continental African Development Bank (ADB) is playing important role in the financing scheme of African based industries. Hasdrubal Oil and Gas Field Development Project in Tunisia was an example of ADB participation as a major player in financing the industry at the tune of $150 million. It was a beginning of local institution flexing its financial muscle in the African based projects.

“IFC has approved an equity investment of up to US$27.3 million in the Lion oil field and Panthere gas field offshore Cote d'Ivoire. The fields are located in Block CI-11, the most significant recent oil and gas discovery in Cote d'Ivoire, and their development is considered one of the country's highest economic priorities. Production of crude oil from the Lion oil field will help Cote d'Ivoire become self-sufficient in its domestic energy needs. Gas production will be used for power generation in the associated power project, in which IFC is also an investor.”

Another African based financial institution, The Africa Finance Corporation (AFC) is another major player in financing of oil and gas industry in Africa. “AFC is an African-led international financial institution whose mission is to improve regional economies by proactively assisting in the development and financing of infrastructure, industrial and other assets across the African continent.”

AFC is focused on financing and assisting industries in Africa including oil and gas industry. In the 1990s:“The Africa Finance Corporation (AFC) has made an equity investment of $20 million in Seven Energy, an indigenous oil and gas exploration and production firm focused on the monetisation of Nigeria's discovered but undeveloped gas reserves. The funds are part of a $200 million equity and debt raise by Seven Energy, and will be used for the development of reserves in the rich oil and gas-producing region of Nigeria. This unique transaction is geared towards the domestic use of gas, including power generation and supply to captive industrial clusters.”

“AFC is a lead investor in the US$240 million African-led Main-One submarine fibre optic cable project, which will provide much needed telecommunications capacity in West Africa. It is also the main African participant in a seven-year US$750 million syndicated reserves based lending facility to develop the landmark Ghanaian Jubilee Oil Field—one of West Africa’s largest deepwater offshore developments in over decade .The Africa Finance Corporation (AFC) has made an equity investment of $20 million in Seven Energy, an indigenous oil and gas exploration and production firm focused on the monetisation of Nigeria's discovered but undeveloped gas reserves. The funds are part of a $200 million equity and debt raise by Seven Energy, and will be used for the development of reserves in the rich oil and gas-producing region of Nigeria. This unique transaction is geared towards the domestic use of gas, including power generation and supply to captive industrial clusters.”

The lack of large capital financing is a major obstacle for oil and gas industry in Africa. For the industry to continue to be viable and buoyant, ways must be devised for readily availability of the capital in local market. African capital markets are improving and continue to be relevant in the oil and gas industry. Banks in the south of Sahara are now selling bonds to international investors and with that come a tremendous growth on the balance sheet. As the indigenous banks grow they can be able to acquire resources and liquidity for capitalization and financing of oil and gas industry

 

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