By Etuka Sunday
Nigeria earned a total of $32.63 billion from the oil and gas sector in 2018, a 55% increase on the $20.99 billion recorded from the sector in 2017.
The information is contained in the latest oil and gas industry audit conducted by the Nigeria Extractive Industries Transparency Initiative (NEITI), which has also announced plans to release the 2019 audit report this year, effectively clearing the backlogs of the audits of the extractive sector and making the reports more timely and relevant.
A breakdown of the $32.63 billion earned in 2018 showed that company-level financial flows into government coffers were $16.6 billion, 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% drop from $54.6 billion in 2014 to $24.8 billion in 2015. The earnings further dropped by 31.2% to $17.05billion in 2016, but increased by 23% to $20.99 billion in 2017 and by 55% to $32.63 billion in 2018. Though the last two years bucked the trend of persisted decrease since 2014, the revenues from the sector in 2018 were still a staggering 40% below the $54.6 billion earned in 2014 when oil prices commenced a precipitous fall.
The NEITI 2018 audit reconciled payments by seventy-one 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 disclosed that “out of the $32.63 billion earned from the sector in 2018, the sum of $19.92 billion was transferred [directly] into the Federation Account, while $5.21billion and $4.04billion were transferred into the JV Cash Call Account and Nigerian National Petroleum Corporation (NNPC) designated accounts respectively.” 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 respectively before remittance to the Federation Account. The report further disclosed that “$2.10billion was transferred into third parties project financing accounts and $1.37billion were recorded as subnational transfers”.
On production, the total crude oil production in the country within the period under review was put at 701 million barrels, representing a slight increase of 1.5% when compared to 690 million barrels produced in 2017.
A breakdown showed that Joint Ventures (JVs) contributed 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 respectively.
“JV companies’ production increased by 3.12% in 2018 compared to 2017, while PSC operators’ production decreased by 10.90%. Similarly, SR operators’ production increased by 58.72% in 2018 compared to 2017. Production from the SC decreased by 10.27% while production from MF operators increased marginally by 1.18%,” the report stated.
The NEITI report further disclosed that total crude oil lifted for both export and domestic sales in 2018 was 701 million barrels, representing a 1.9% increase when compared with total liftings of 688.3 million barrels in 2017.
Analysis of the total lifting in 2018 showed that 255.6 million barrels or 36% was lifted by NNPC on behalf of the Federation, while companies lifted 445.5 million barrels or 64% of total liftings. The liftings by NNPC indicates an increase of 5.95% 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% of the DCA were utilized for Direct Sale Direct Purchase (DSDP), while the balance of 13.58 million barrels or 13% 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% of the customary allocation for domestic consumption was allocated in 2018.
According to the NEITI report, 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% when compared to 16.824million barrels recorded in 2017”. Similarly, the report put total products 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 increase of 7.10% when compared to 721.80thousand metric ton valued at $286, 85 million realized in 2017.
“The national gas reserve stood at 200.79tcf as at 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 management of Joint Venture Cash Call, the report disclosed that aggregate cash call funding for 2018 amounted to $5.98billion. In addition, the report noted that: “outstanding Cash Call Liabilities amounted to $3.66billion, comprising $3.41billion (93%) legacy liabilities and US$260million (7%) 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 $902.67million. This consists of voluntary contribution of $59.27million (6.57%) while mandatory contribution stood at $843.39million (93.40%)”. The mandatory contribution was made up of NDDC’s 3% levy of $683.38million and NCDMB’s 1% levy of $160.01million.
Oil and gas industry contribution to the Gross Domestic Product (GDP) in 2018 was put at 7.8%. “The flows in the industry accounted for $32.64billion in absolute terms. This represents 7.8% of the total GDP Current Basic Price of ($ 418.12billion)”.
On contribution to exports, the oil and gas industry accounted for $19.13 billion in absolute terms. This represents 30.6% of total exports ($62.49billion) 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% of the total employment (69.54million) in Nigeria. In aggregate, employment distribution in the industry was 18% (3,595) female and 82% (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.