Crude Oil Swap Probe: Reps uncover illegal companies used by NNPC

The House of Representatives adhoc committee on Crude Oil Swap Probe Wednesday confirmed the receipt of the illegal companies registered by Nigerian National Petroleum Corporation ,NNPC, but unknown to the Federal Ministry of Finance Incorporated ,MOFI.

The list was part of the documents obtained from the Office of the Accountant of the Federation ,(oAGF) for the ongoing investigative public hearing on the $24 billion crude oil swap deals , as revealed by Rep Hamman Pategi ,APC,Kwara a member of the committee. One of the companies was Duke Oil , set up to trade crude oil on behalf of NNPC at the international market.

 Also former Group Managing Director ,GMD, of the Nigerian National Petroleum Corporation ,NNPC, Joseph Dawha told the panel headed by Rep Zakari Mohammed how he migrated the corporation from crude oil deals to Offshore Processing Agreements, OPA, absolving himself of blames over the flawed crude oil for products exchange (oil swap) arrangement.

Dawha, who appeared before the committee Wednesday said he met the arrangement on ground on assumption of duty in August 2014 but was not comfortable with it. According to the former GMD, NNPC entered into oil swap and Offshore Processing Agreement (OPA) contracts with the trading companies in 2010 to terminate between 2013 and 2014.

Dawha explained that the total volume of cride under these arrangements was 210,000 barrels per day. Although these contracts expired m NNPC had continued to operate the contracts. “Thus, as of August 2014 when I assumed office the contracts were still being run long after they had all expired. “Based on legal and compelling need to reconcile the contracts to ensure actual delivery and receipt of the agreed volume of products against the crude lifted it became imperative that the arrangement under which the parties had been operating for several months prior to my assumption of office without formal contracts be formalized to provide legal basis do the parties’ rights and obligations.

“Subsequently, we requested approval from the then Minister of Petroleum Resources for renewal of the contracts. Upon receipt of the then Minister’s approval granted on 29th August 2014, the contracts were formally extended to cover the periods from their respective dates of expiry until the end of December 2014. “If I had not got the Ministerial approval, I may have been the GMD with the shortest tenure because there is no way I would have allowed it to continue”. He told the Committee that oil swap was eventually dropped for OPA based on value, while adding that the same trading firms involved with the oil swap arrangement were contracted to continue with the OPA.

The Committee however expressed concern over why would Dawha, who was able to identify the flaws with the previous contracts still engage the same companies that breached the oil swap contracts for the OPA. Dawha said he decided to continue with the said companies because they were on the existing platform for supply, adding that the precariuos situation of fuel suply at the time left NNPC with no time to engage new traders.

The Committee queried why 15-staff of Duke Oil Incorporated that was registered in Panama, but has an office in the United Kingdom (UK) and an affiliate in Nigeria. The Committee asked why a Nigeria company registered offshore pays its due taxes to its host country, while a non-resident company Trafigura, based in the Netherland lifts Nigerian oil but refused to pay tax to the Nigerian government.

The Committee was told by the representative of Duke oil that its UK office pays its tax, same as the Nigerian subsidiary, DUGIL to the Nigerian government. The representative said the confusion over Duke oil was that Nigerian law stipulates that an offshore company must have a Nigerian affiliate before it can engage in business transactions in Nigeria. He said that was the reason behind the establishment of DUGIL, in addition to building Nigerian trading capacity, adding that it has not been found to have defaulted in its tax obligations.

At this point the Committee queried why a non-resident trading company, Trafigura B.V would lift thousands of barrels of crude oil daily without an affiliate company in Nigeria. Trafigura has insisted that it will not pay tax to Nigeria because it was an international company. It’s representative at the hearing, James Juslin said the company also has no office in Nigeria. Vanguard recalls that the Federal Inland Revenue Service, FIRS had requested for their tax receipts which has not been produced as at 3 weeks ago.