- How the Corporation connives with Swiss Traders to steal Nigeria’s crude oil
By Ohia Israel
A damning report titled “Big Spenders: Swiss Trading Companies, African Oil and the Risks of Opacity,” published by Bern Declaration, a Switzerland non-profit transparency organisation, has exposed how the Nigeria National Petroleum Corporation (NNPC) selects companies it sells the Nation’s Crude oil to, through a process the report described as “filled with monumental corruption and intense uncertainty, likened to beauty pageant”.
The report which was co-authored by a Swiss NGO, SwissAid, and an American one, the Natural Resource Governance Institute (NRGI), takes into cognizance trading by Sub-Saharan African countries undertaken between 2011 and 2013. According to the report, Swiss companies purchased over 500 million barrels of crude valued at $55 billion from 10 sub-Saharan African countries within the period under review; the figures “equal(s) 12 percent of the governments’ revenues, and are double what they receive in foreign aid.”
The Swiss trading companies are the largest buyers of crude from Cameroon, Chad, Equatorial Guinea, Gabon and Nigeria, BD states that these purchases are subject to governance risks because “they take place in environments of weak institutions and widespread corruption”.
Taking Nigeria for example, the report said that the value of crude sold to Swiss trading companies at $37 billion makes up more than 18 per cent of total government revenue in the period under review.
The report also found out that unlike most major crude producers around the world, which prefer to sell crude directly to refineries and end users, the Nigerian National Petroleum Corporation, NNPC, sold over a third of Nigeria’s crude between 2011 and 2013 to Swiss companies alone.
“In 2011 and 2012, Swiss companies bought almost half of the identified export sales made by the Nigerian National Petroleum Corporation (NNPC), an estimated $27 billion worth of crude. While this figure dropped to a little less than one third in 2013, as Nigerian companies became bigger buyers, Swiss companies still bought government crude worth an estimated $10 billion.”
The report stated that the annual term contract through which the NNPC selects companies that are eligible to buy crude is so skewed by favouritism and corruption with its criteria for selection so opaque that it could only be likened to the process of selecting the winner of a beauty pageant.
The report further stated that many of the trading companies on the list are allowed to lift far more that the quantity they are officially allotted. “In 2012, Vitol and Trafigura each received term contracts worth 30,000 barrels per day. Each of the companies also operates its own oil marketing joint venture with NNPC (both based in Bermuda: Calson for Vitol and Napoil for Trafigura), and these entities each received additional 30,000 barrel per day allocations that year.
“However, rather than 60,000, data suggests that Vitol bought closer to 145,000 barrels per day in 2012, and Trafigura 97,000—far exceeding their allotted shares, an a discrepancy that illustrates the laxity of the system.”
In fact some companies, which do not appear on the award list, are allowed to lift crude. Particular mention was made of Swiss firm, Arcadia, which lifted 19 cargoes between 2011 and 2013 despite not being approved to lift crude.
“Nigeria’s award of the term contracts is a discretionary and politicized process, with companies gaining and losing allocations depending on their relationship with the officials in charge and the influence of their local contacts or ‘sponsors,” the report states.
NNPC sells crude to politically exposed “briefcase traders” who in turn sell to Swiss trading companies at a margin “effectively privatizing a profit that could go to the states that sold the oil,” stated the report.
Stating further the Bern Declaration (BD) said that NNPC sells crude below the market value to Bermuda-based subsidiary, Calson. Vitol, a top Swiss trading company, owns 49 percent of Calson. However, in order to quell this illegal approach, the report calls for better transparency in the system. It advises government to select “buyers through a method that reduces opportunities for favouritism, bribery and manipulation. It also suggested that attracting the best possible return for the oil in question, as losses of just pennies per barrel can add up to significant revenue shortfalls; and insists on “collecting and transferring the revenues to the treasury through a rule-based process that reflects clear national priorities.”
It would be recalled that prior to this latest report by Bern Declaration, it had in November 2013 published a report detailing how the Nigerian National Petroleum Corporation (NNPC), in connivance with major Swiss oil trading companies, is depriving Nigeria of billions of dollars of revenue through the sale of crude oil below market value.
According to the report, Nigeria has lost about $7 billion to these underhanded activities of NNPC top officials. The report, titled, “Swiss Traders’ Opaque Deals in Nigeria”, was released last Monday by a Swiss non-governmental advocacy organization – the Berne Declaration.
The report described the schemes employed by Nigerian and foreign fuel importers, such as the creation of offshore subsidiaries referred to as “letterbox companies,”, ship-to-ship transfer to create untraceable paperwork, payment of subsidy money to phantom and non-existent importers, and partnering with “Politically Exposed Persons” (PEPs) to defraud the country of over $6.8 billion between 2009 and 2011.
The report said it was clear that Swiss traders were contributing to the perpetuation of a corrupt system which was characterized by ‘letterbox’ companies drawing crude oil export allocations solely as a result of the owners’ proximity to politically exposed persons (PEPs); – opaque calls for tender whose criteria were unknown to the public.
The system also included suspicions of crude oil sales at knock-down prices, or prices that were unfavourable to the Nigerian state, in particular in the framework of the partnerships concluded between the NNPC and Vitol and Trafigura respectively.
The report added that “In imports, Switzerland’s role in hosting trading companies proves to be equally problematic, in several respects …” It described the Nigerian oil scam as the greatest fraud Africa had ever known, and described a network by which transactions were made through shell companies in Switzerland and notorious offshore tax havens in Bermuda, to deny Nigeria billions of naira in tax earnings.
The report identified seven major oil marketers and fuel importers as most complacent in these shady activities. They include MRS Group, which owns a subsidiary called Petrowest Services SA; Ontario Oil and Gas limited, which has a Swiss Subsidiary named Ontario Trading and located at the premises of Nimex Petroleum in Geneva; Rahamaniyya Group, which owns a subsidiary called Rahamaniyya Oil and Gas SA in Geneva since October 2010; and Nimex Petroleum which the report suggested may be acting as an incubator for shady companies.
The rest are Tridax Energy Limited and Mezcor Limited, with Swiss subsidiaries, Tridax SA, Mezcor SA in Geneva; Sahara Energy with a Swiss subsidiary Sahara International Pte Limited; and Aiteo Energy Resources Limited, with a subsidiary in Geneva called Aiteo Suisse AG.
According to the report, these companies had been traced to close associates and the younger brother of Nigeria’s Minister of Petroleum, Diezani Alison-Madueke, and had been indicted by committees investigating massive fraud in Nigeria’s subsidy scandal.
The NNPC had also been indicted by several reports for its inefficient management of the funds from the country’s huge oil resources, the report added.
Meanwhile, in late last year, House of Representatives instructed its Committees on Petroleum Upstream and Downstream as well as the Committee on Justice to commence investigation of alleged connivance between Nigeria National Petroleum Corporation (NNPC) and some Swiss oil dealers to steal crude oil from the country. The theft spree, it was reported, has cost the nation revenue loss in the range of billions of dollars.
All stakeholders fingered in the illegal deal, including a major partner of NNPC, Vitol and Transfigura Commodity Trading Firms, are expected to answer some questions before the panel. The decision to probe the deal was fallout of a motion sponsored by Abiodun Abudu-Balogun, titled “Urgent need to investigate the alleged connivance of the Nigeria National Petroleum Corporation (NNPC) with Swiss Oil Dealers to rob Nigeria billion of Dollars”.
Moving the motion, Balogun pointed out that several scandals of oil theft have been recorded in the country, adding that “the latest revelation must be probed to get to the root of the matter.”
In his lead debate on the motion, he accused the NNPC of selling crude oil below global market value, as he said that almost 100 per cent of Nigeria crude is being sold to private traders under shady deals. He claimed that the source of his motion which was a new report by Swiss non-governmental advocacy organisation, titled “Swiss Traders Opaque Deals in Nigeria”, described the scam as the biggest oil fraud in Africa.
He said the report accused NNPC of being “in connivance with major Swiss oil trading companies, draining Nigeria of billions of dollars of revenue through the sale of crude oil below the market value. Nigeria is the only major oil producing nation that sells 100 per cent of its crude oil allocations to private traders, rather than marketing it herself and benefit from the resulting added value with the greatest number of beneficiaries of export allocations.”
He further accused that “the sharp practices and deals in NNPC crude allocations to local refineries are not utilized but sold fraudulently at knock down prices to Geneva based companies through letter box companies by SWAP arrangement”.
It is also gathered that this is not the only way Nigeria’s Crude Oil are stolen, as the “principality” in this joint venture of frauds, Shell Petroleum Development Company of Nigeria (SPDC) at a Nigerian Oil and Gas (NOG) 2013 Exhibition and Conference challenged President Goodluck Jonathan that instead of gallivanting to European and other foreign countries to seek for help on tackling crude oil theft, the Goodluck Jonathan administration should move against “principalities and powers in high places,” who are the sponsors of crude oil theft in the Niger Delta.
It would be recalled that barely one week from the exchange between Shell and the Presidency on the issue of crude oil theft in the Niger Delta, the “power” in this spiritual wickedness against the Nigerian people, the nation’s apex oil concern- the Nigerian National Petroleum Corporation (NNPC) on Tuesday 6th August 2013 in a statement in Abuja disputed claims by Shell that their joint venture lost over $700 million (about N109.9 billion) to crude oil theft and vandalism.
“The NNPC said that contrary to the outrageous figures Shell is dangling as volume of crude oil lost to thieves, the combined efforts of the government and the international oil companies (IOCs) have resulted in a significant drop in the level of pipeline vandalism and crude oil theft, with a corresponding increase in daily crude oil production. Shell and NNPC jointly own several oil blocs which the Anglo-Dutch multinational oil concern manages as the operator.
As posited by NNPC’s Acting Group General Manager, Public Affairs Division, Tumini Green, “Shell’s claim that it lost over $700 million by the second quarter of 2013 to crude oil theft and other disruptions in Nigeria was wrong, as such losses were not localized to the country. The NNPC claimed that with the repair and re-opening of some vandalized pipelines and flow stations in recent times, the country’s average crude oil production, which stood at 2.13 million barrels per day in June, increased to about 2.4 million barrels per day which is the current production figure.
Even without making a single comment on this, it is very glaring that the dispute between Shell and the NNPC highlights the gravity of the dearth of transparency and accountability in the operations of the country’s petroleum industry.
The fact that two partners in a major joint venture could find it difficult to have the same records and data of their joint operations is a clear confirmation that this people have been taking this nation for granted over a long time.