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Reps probe petrol subsidy payments, allege $10bn revenue loss


House of RepsThe House of Representatives has resolved to investigate payments for subsidy on petroleum products especially Premium Motor Spirit popularly known as petrol under the regime led by the President, Major General Muhammadu Buhari (retd.).

Speaker of the House, Femi Gbajabiamila, is to set up an ‘Ad Hoc Committee to Investigate the Petroleum Products Subsidy regime from 2017 to 2021,’ which is to report back to the House within eight weeks for further legislative action.

The probe is based on a motion, titled ‘Need to Investigate the Petroleum Products Subsidy Regime in Nigeria from 2017 to 2021,’ which a member of the House, Sergius Ogun, moved at the plenary on Wednesday and the lawmakers unanimously adopted.

Ogun noted that Section 88 (1) and (2) of the 1999 Constitution empowers the National Assembly to conduct investigations into the activities of any authority executing or administering laws made by the National Assembly

He also noted that Section 32 of the Petroleum Industry Act, 2021, saddles the Petroleum Midstream and Downstream Regulatory Authority with the task of regulating and monitoring technical and commercial midstream and downstream petroleum operations in Nigeria. The lawmaker said as of 2002, the Nigerian National Petroleum Corporation’s purchase of crude oil at international market prices stood at 445,000 barrels per day in order to enable it to provide petroleum products for local consumption;

“The House is concerned that as of 2002, the installed capacity of Nigeria’s local refineries stood at 445,000 barrels per day, however, their capacity utilisation began to nosedive and eventually fell completely to zero due to the ineffectiveness and alleged corruption of critical stakeholders in the value chain,” he said.

Ogun explained that due to the decline in the production capacity of the refineries, the NNPC, now Nigerian National Petroleum Company Limited, found it more convenient to export domestic crude in exchange for petroleum products on a trade-by-barter basis, described as Direct Sales Direct Purchase arrangement.

The lawmaker pointed out that the component costs in the petroleum products subsidy value chain claimed by the NNPC was “highly over-bloated,” while the transfer pump price per litre used by the NNPC in relation to PPMC was under quoted as N123-N128, instead of N162-N165, “and this fraudulent under-reporting of N37-N39 per litre translates into over N70bn a month or N840bn a year.”

He said, “The House is worried that the consumption rate of PMS is 40million to 45million litres per day. However, the NNPC uses 65 million to 100 million litres per day to determine subsidy as discoverable from NNPC’s monthly reports to the Federal Allocation Committee.

“The House is also worried that the subsidy regime has been unscrupulously used by the NNPC and other critical stakeholders to subvert the nation’s crude oil revenue to the tune of over $10bn, with records showing that as at 2021, over $7bn in over 120 million barrels have been so diverted. “The House is disturbed that there exists evidence that subsidy amounts are being duplicated, thus subsidy is charged against petroleum products sales in the books of the NNPC as well as against crude oil revenue in the books of NAPIMS to the tune of over N2tn.”

Reps probe oil spills at three OMLs, abandoned oil wells

In a related development, the House of Representatives has resolved to investigate abandoned oil wells and spills from at least three Oil Mining Leases. The House particularly mandated its Committees on Petroleum Resources (Upstream) and Environment to “investigate the actual cause of the oil leaks at OML 18, OML 29 and OML 63, with a mandate to utilise experienced professionals to provide required insight, support and results.”

The committee is also to “determine the magnitude, scope, and effect of the leaks on affected hast communities; examine the scope and liability for required relief and compensation, including the status of provision of same; inquire the nature and details of the JV agreement between Aiteo and NNPC to determine veracity of ownership of percentage stake and financial obligations.

“Confirm the claim by Aiteo of engagement of a foreign company to stop the leak, the cost of doing so and the financial claim made by Aiteo to NAPIMS in this regard;  and examine the nature and details of the JV agreement between Eroton and NNPC to determine completion of financial and other obligations for ownership.”

Furthermore, the panel will “verify the numbers of idle and isolated wells currently existing on Aiteo, Eroton and other indigenous and international oil companies’ oil fields across Nigeria, the condition of these wells and the status of their management and abandonment in compliance with statutory provisions and international best practice.”

In addition, it will “explain the potential for significant residual deposits from identified idle and isolated wells across the country, the best methodology and strategy to achieve this additional revenue stream and the best international best practices being employed by other oil producing countries to achieve this.”

The committee is to report back to the house within two weeks for further legislative action.

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