Nigeria starts investigating crude oil swap contracts

Abuja - Authorities have launched an investigation to determine
whether the government has been short-changed by a state oil
company scheme to swap crude for refined products, the company,
three oil traders and a security source said.
The government may be losing money through opaque contracts in
which crude oil worth billions of dollars is given to traders in
exchange for refined imports, mainly gasoline, international and
domestic watchdogs have said.
The EFCC and domestic intelligence service DSS began the
investigation last month. A spokesman for the EFCC said he was
unable to comment for the moment and the DSS did not respond to
requests for comment.
A security source with knowledge of the matter said the DSS wanted
to find out how the value of the crude and products was computed.
"It appears that the value of the crude was more than the value of the
refined imported," the security source said.
The contracts, known as offshore processing agreements (OPAs) are
between Pipelines and Product Marketing Co (PPMC), a subsidiary of
state-run Nigerian National Petroleum Corp (NNPC) and three oil
trading companies: Sahara Group, Aiteo and Duke Oil, the trading
subsidiary of NNPC.
Expired contracts with Swiss trader Trafigura, Taleveras, Ontario Oil
and Gas are also being examined, the sources said.
The PPMC head was among the NNPC and company officials called in the
investigating agencies in the past two weeks to answer questions
about the agreements, the NNPC sources said.
"It started about two weeks ago...he was called in to the DSS
everyday since Thursday and before that by the EFCC," one senior
official at the company said.
A statement from the NNPC said some of its officials were invited by
the agencies "to shed light" on the contracts and that none had been
detained or arrested as part of this investigation.
The Nigerian Extractive Industries Transparency Initiative has said
there was a revenue loss of at least $600 million due to a discrepancy
between the value of the crude and the products delivered. The figure
was taken from its 2009-2011 and 2012 audits of the oil and gas
industry, the latest was released this year.
Some contract-holders have said that the discrepancies in value were
reconciled.
JUSTIFIED
Sahara, which receives 90,000 barrels per day for processing through
an agreement with the Societe Ivorienne de Raffinage (SIR), said it
was invited to the EFCC and submitted information to show that its
contract was justified.
Aiteo, which also has a 90,000 bpd contract, could not be reached for
comment. There was no response to a Reuters email and no telephone
details were given on its website.
Duke Oil, an NNPC subsidiary, which has a 30,000 bpd contract, could
also not be reached for comment. The listed phone number led to NNPC
and it did not respond to an email.
A spokesman for Taleveras, that held a crude swaps contract between
2011 and December 2014 via Duke Oil, said that the company did not
owe any money and it would deliver gasoline until June this year to
balance out what it received in crude.
A spokesman for Trafigura said that the EFCC had requested
information about their swap contract and it was provided by the
company in the past month. Trafigura held a Refined Products
Exchange Agreement, or swap contract, between Oct. 2010 and Dec.
2014.
"Despite Trafigura facing extensive logistical challenges in delivering
refined product into Nigeria...delivery would typically precede the
corresponding swap of crude oil by an order of weeks - sometimes
months," the spokesman said.
"This reality led to ongoing supply imbalances...and ultimately
reconciled, every two months over the duration of the term."
Nigeria relies on imports for the bulk of its domestic gasoline demand,
which is met by gasoline coming via the crude exchanges and through
a subsidy scheme that was at the root of acute fuel shortages at the
end of May.
The new administration of Muhammadu Buhari came into power on an
anti-corruption platform and the EFCC is keen show it has teeth.
Right after Buhari's inauguration on May 29, six central bankers and
16 commercial bank staff were accused of currency fraud by the
EFCC, the agency said.
The EFCC has investigated various oil scandals in the recent past,
namely a fuel subsidy fraud costing the government $6.8 billion
between 2009-2011. But due to a lack of political will from the top,
only a handful were prosecuted with little result.