Neiti-Oil-Gas-Report-2016-Full-Report
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NEITI 2016 OIL AND GAS FULL REPORT Prepared by: Haruna Yahaya & Co, (Chartered Accountants) Ahmadu Bello House, Shiroro Road Minna, E-Mail: [email protected], www.harunayahaya.org Tel: 08078490827, 08034547524 1 NEITI 2016 OIL AND GAS FULL REPORT 3rdDecember, 2018 The Executive Secretary, Nigeria Extractive Industries Transparency Initiative (NEITI), 60, Nelson Mandela Street, Off Kwame Nkrumah Street, Asokoro, Abuja FINANCIAL, PHYSICAL AND PROCESS AUDIT OF THE NIGERIAN OIL AND GAS INDUSTRY: AN INDEPENDENT REPORT ASSESSING AND RECONCILING PHYSICAL AND FINANCIAL FLOWS WITHIN NIGERIA’S OIL AND GAS INDUSTRY - 2016 The Firm of Messer HARUNA YAHAYA & CO. (Chartered Accountants) was appointed by National Stakeholders Working Group (NSWG) of the Nigeria Extractive Industries Transparency Initiative (NEITI) as the Fifth Independent Administrator (IA) to undertake the review and reconciliation of Financial, Physical and Process Audit of Nigeria’s Oil and Gas Industry for the year ended 31stDecember 2016 in line with the requirements of NEITI Act 2007. The engagement was carried out in accordance with the International Standards on Related Services (ISRS 4400), applicable to agreed-upon procedures. The procedures performed were as set out in the Terms of Reference (ToR) appended to this report as appendices. In the ToR, it was the responsibility of the Management of the covered entities to provide us with the required information/data on production levels and financial flows to the Federation Account while it is our responsibility to carry out independent review of the information/data provided and report our observations together with recommendations to NSWG. The methodology and approach adopted for this engagement, was not designed to constitute an investigation/audit or review engagement made in accordance with International Standards on Auditing or on review of engagement. Accordingly, we do not express any assurance on the transaction beyond the explicit statement set out in this report. This report is solely to inform the NSWG on all matters set out in our terms of reference, relates only to the subject matter specifically set out herein and does not extend to any financial statement of any entity taken as a whole. Yours Faithfully, Haruna N. Yahaya, FCA, mni Managing Partner/CEO 2 NEITI 2016 OIL AND GAS FULL REPORT Table of Contents ................................................................................................................................................. Error! Bookmark not defined. 1.0 Introduction ..................................................................................................................................................................... 13 1.1 EITI implementation.............................................................................................................................................. 13 1.2 EITI implementation in Nigeria ........................................................................................................................... 13 1.3 Structure of the Report ........................................................................................................................................... 13 1.4 Approach and methodology ................................................................................................................................... 14 1.5 Objectives of the Assignment ................................................................................................................................... 15 1.6 Sources of data ........................................................................................................................................................ 15 1.7 Basis of accounting ................................................................................................................................................. 15 1.8 Materiality for reporting ......................................................................................................................................... 16 1.8.1 NSWG materiality decisions ............................................................................................................................... 16 1.8.2 Independent Administrators (IAs) opinion on materiality decisions .............................................................. 19 1.9 Data Quality and Assurance ..................................................................................................................................... 20 1.9.1 Legal and institutional requirement(s) for data quality and assurance in Nigeria ..................................... 20 1.9.2 Assessment of practice .................................................................................................................................... 21 1.9.3 Procedure for establishing data quality assurance set by the IA ..................................................................... 22 1.9.4 Assessment of compliance with the IA‟s assurance procedure .................................................................... 22 1.9.5 IA‟s assessment on the quality, comprehensiveness, and reliability of data utilised .................................. 23 1.9.6. Limitation of the assessment ......................................................................................................................... 24 1.10 Aggregate Financial Flows ................................................................................................................................... 24 1.11 Five-year aggregate financial flow........................................................................................................................ 26 2.0 Production ...................................................................................................................................................................... 29 2.1 Crude Oil Production ................................................................................................................................................ 29 2.2 Total Crude Oil Production and Lifting .................................................................................................................. 29 2.3: Five-year trend analysis of production and lifting .............................................................................................. 33 2.4 Monthly crude oil production by production arrangements ............................................................................... 35 2.4.1 Monthly crude oil lifting by production arrangements .................................................................................... 37 2.5 Gas production ....................................................................................................................................................... 38 2.5.1 Introduction ..................................................................................................................................................... 38 2.5.2 Gas production and utilization .......................................................................................................................... 38 2.6 Crude losses ............................................................................................................................................................ 42 2.6.1 Losses from sabotage and theft ...................................................................................................................... 42 2.6.2 Losses from deferment .................................................................................................................................... 43 3 NEITI 2016 OIL AND GAS FULL REPORT 2.6.3. Analyis of crude oil production and losses against expected production .................................................. 44 3.0 Federation Crude Oil and Gas Sales ......................................................................................................................... 46 3.1 Background ............................................................................................................................................................. 46 3.2 Sources of the Federation‟s crude oil and gas for lifting ........................................................................................ 46 3.3 Crude oil sales, bidding process and terms of contracts ........................................................................................ 47 3.4 Federation‟s lifting profile of crude oil and destination accounts ......................................................................... 48 3.5 Federation‟s lifting in volume ................................................................................................................................... 49 3.6 NNPC lifting and destination accounts ............................................................................................................... 50 3.7. Lifting profile of gas and destination accounts ...................................................................................................... 52 3.7.1 Federation lifting volume ................................................................................................................................ 52 3.7.2 Summary of gas volume and value of NNPC lifting and destination accounts ............................................. 52 3.8. Federation export crude, gas/NLNG feedstock receivables control account .................................................. 55 3.9