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FG Loses $1.09bn Accruable Revenue In Gas Flaring Penalties

The Federation Account was short-changed of a whopping sum of $1,098,569,547 by oil and gas exploration entities during the 2015 fiscal year due to non-compliance with the approved rate of penalties for flared gases by the affected entities.

This fiscal abuse was among many others reported by the Nigeria Extractive Industry Transparency Initiative (NEITI) in its just published 2015 Oil and Gas Audit Report published at the weekend.

Specifically, NEITI pointed out in the report that the current gas flared penalty charge at 10/1000mscf had not served as a deterrent to gas flaring by the companies., adding that “if the FEC approved rate of 3.5$ per 1000mscf had been applied in 2015, gas flared penalty would have been $1,111,252,625 as against the actual collection of $12,683,078, meaning an extra $1,098,569,547 would have accrued.”

Apart from the huge losses associated with the abuses in the implementation of the applicable rate on gas flaring by the upstream companies, the agency also reported, among other fiscal infractions, the failure of the Nigeria National Petroleum Corporation (NNPC) to remit to the Federation the sum of $16,477,740.02 and N1,597,275,831.11 paid by IOCs as pipeline transportation fee.

In the report, NEITI accused the state-owned oil corporation of failure to reconcile some of its records including, export sales receivable of $586.01 million; sales receivable of N317.476 billion as well as the corporation’s deduction first line charge of N60.997 billion for crude and product oil losses.

Other allegations contained in the report are, the corporation’s deduction of N112.818 billion for “pipeline repairs and maintenance; and N316.72 billion for subsidy deduction, noting that “the sum of N316.72 billion deducted as first line charge for “Subsidy deduction” contravenes the institutional framework of the Petroleum Support Fund (PSF) which requires, among other things, that all subsidy claims and payment should be drawn from the PSF.”

Similarly, the report further showed that inconsistent application of pricing methodology for Export Crude Oil and Domestic Crude Sales during the year under review also cost the country a revenue loss of $735,724.68 and $90.176 million respectively.


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