Nigeria earned a total of $32.63 billion from the oil and gas sector in 2018, representing a 55 percent increase on the $20.99 billion recorded from the sector in 2017, according to the latest oil and gas industry audit conducted by Nigeria Extractive Industries Transparency Initiative, NEITI.
Orji Ogbonnaya Orji, its director, Communications and Advocacy, who made this known in a statement on Monday, March 30, 2020, said of the amount, $16.6 billion was from company-level financial flows into government coffers, while flows from sales of federation crude oil and gas accounted for $16 billion.
A five-year trend analysis of the earnings from the extractive sector showed a 54.6 percent drop from $54.6 billion in 2014 to $24.8 billion in 2015. The earnings further dropped by 31.2 percent to $17.05 billion in 2016 but increased by 23 percent to $20.99 billion in 2017 and by 55 percent to $32.63 billion in 2018.
Orji said although the last two years bucked the trend of persisted decrease since 2014, the revenues from the sector in 2018 were still a staggering 40 percent below the $54.6 billion earned in 2014 when oil prices commenced a precipitous fall.
The NEITI 2018 audit reconciled payments by 71 companies and the Nigeria Liquefied Natural Gas (NLNG) that met the materiality threshold set for the exercise. A total of eight government entities were also covered by the audit.
The report indicated that “out of the $32.63 billion earned from the sector in 2018, $19.92 billion was transferred (directly) into the Federation Account, while $5.21 billion and $4.04 billion were transferred into the JV Cash Call Account and Nigerian National Petroleum Corporation, NNPC, designated accounts”.
The NNPC designated accounts are the naira and dollar accounts where domestic crude sales and the federation equity, royalty, petroleum profit tax, and in-kind oil sales are paid into before remittance to the Federation Account. The report said: “$2.10 billion was transferred into third parties project financing accounts and $1.37 billion were recorded as subnational transfers”.
On production, the total crude oil production in the country within the period under review stood at 701 million barrels, representing a slight increase of 1.5 percent when compared to 690 million barrels produced in 2017.
A breakdown showed that Joint Ventures (JVs) contributed the highest production of 315 million barrels, followed by Production Sharing Contracts (PSCs) which recorded 270.610 million barrels. Other funding arrangements like Sole Risk (SR), Marginal Fields (MFs) and Service Contracts (SCs) accounted for 92.2 million barrels, 22 million barrels, and 1.3 million barrels.
“JV companies’ production increased by 3.12 percent in 2018 compared to 2017, while PSC operators production decreased by 10.90 per cent. Similarly, SR operators’ production increased by 58.72 percent in 2018 compared to 2017.
Also, production from the SC decreased by 10.27 percent while production from MF operators increased marginally by 1.18 percent,” the report stated.
Analysis of the total lifting in 2018 showed that 255.6 million barrels or 36 percent were lifted by NNPC, on behalf of the Federation, while companies lifted 445.5 million barrels or 64 percent of total liftings. The liftings by NNPC indicated an increase of 5.95 percent when compared to 241 million barrels lifted in 2017. Further analysis showed that out of 255.6 million barrels lifted by NNPC in 2018, actual sales were 255.3 million barrels valued at $18.2 billion.
Out of the 255.6 million barrels lifted on behalf of the Federation by NNPC, a total of 107.63million barrels was recorded as Domestic Crude Allocation, DCA, in 2018. Out of this figure, 94 million barrels or 87 percent of the DCA were utilized for Direct Sale Direct Purchase, DSDP, while the balance of 13.58 million barrels or 13 percent was delivered to the refineries. Ordinarily, 160.2 million barrels (or 445, 000 barrels per day) should have been allocated for domestic consumption but only 107.63 million barrels or 67 per of the customary allocation for domestic consumption was allocated in 2018.
According to the NEITI report, the sum of N2.295 trillion was realized as proceeds from sales of domestic crude oil allocation in 2018, out of which the following deductions were made: N722.3billion for under-recovery of imported petroleum products, N28.3 billion for crude and product losses and N138.95billion for pipeline repairs and maintenance cost.
The report also revealed that in 2018 “total crude oil losses due to theft and sabotage was 53.28million barrels, an increase of 46.15 percent when compared to 16.824 million barrels recorded in 2017”. Similarly, the report put total product losses in 2018, due to pipeline breakages at 204,397.07 cubic meters.
On gas production, the NEITI 2018 oil and gas report revealed that the total gas production for the year under review was 2,909,143.69mmscf, while total gas utilization was 2,909,143.55 mmscf.
From the report, $307.20million was realized from the sales of Federation gas of 633.55thousand metric tons in 2018. This represents an increase of 7.10 percent when compared to 721.80thousand metric tons valued at $286, 85 million realized in 2017.
“The national gas reserve stood at 200.79tcf as at the end of 2018. This is made up of 101.98 tcf of Associated Gas, AG, and 98.81 tcf of Non-Associated Gas, NAG. With the 2018 annual gas production quantity, the Gas Reserves Life Index, RLI, was estimated at 92 years”, the report disclosed.
On the management of Joint Venture Cash Call, the report disclosed that aggregate cash call funding for 2018 amounted to $5.98 billion. In addition, the report noted that: “outstanding Cash Call Liabilities amounted to $3.66 billion, comprising $3.41 billion (93 percent) legacy liabilities and US$260 million (7 percent) performance balance payable to JV operators”.
Another feature of the oil and gas report is on social expenditure. “Total social expenditure (mandatory and voluntary expenditures) was $902.67 million. This consists of a voluntary contribution of $59.27 million (6.57 percent) while the mandatory contribution stood at $843.39 million (93.40 percent)”. The mandatory contribution was made up of NDDC’s 3 percent levy of $683.38 million and NCDMB’s 1per cent levy of $160.01 million.
The oil and gas industry contributes to the Gross Domestic Product, GDP, in 2018 was put at 7.8 percent.
“The flows in the industry accounted for $32.64 billion in absolute terms. This represents 7.8 percent of the total GDP Current Basic Price of ($ 418.12 billion)”.
On contribution to exports, the oil and gas industry accounted for $19.13 billion in absolute terms. This represents 30.6 percent of total exports ($62.49 billion) in 2018. Similarly, “employment in the oil and gas industry accounted for 19,820 employees in absolute terms (The total number of employees in the sector). This represents 0.03 percent of the total employment (69.54 million) in Nigeria. In aggregate, employment distribution in the industry was 18 percent (3,595) female and 82 percent (16,225) male” the report stated.
This is the 11th cycle of independent oil and gas industry audit exercise by NEITI in line with its enabling Law and Nigeria’s obligation to the global Extractive Industries Transparency Initiative, EITI. The audit was conducted by Adeshile Adedeji & Co., (Chartered Accountants), an indigenous accounting and auditing firm.
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