(Reuters) - Nigeria’s government owes the state-owned oil firm for improper, informal loans used to cover a range of expenses, from a presidential helicopter to maritime security, a report of a partial audit will say.
Here is a look at Nigeria, the largest oil producer in Africa, and its indebted oil company:
- Oil was discovered in Nigeria in 1956 at Oloibiri in the Niger Delta after half a century of exploration. The discovery was made by Shell-BP, at the time the sole concessionaire. Nigeria joined the ranks of oil producers in 1958 when its first oil field came on stream producing 5,100 barrels per day.
- In 1970, the end of a war in Biafra, where much of Nigeria’s oil reserves were located, coincided with the rise in world oil prices, and Nigeria was able to reap instant riches.
- Nigeria joined the Organisation of Petroleum Exporting Countries in 1971 and the same year established the Nigerian National Oil Corp which took stakes in many foreign companies.
- The Nigerian National Petroleum Corporation, (NNPC), was established in 1977, by a merger of the Nigerian National Oil Corporation, NNOC, with its operational functions, and the Federal Ministry of Mines and Power with its regulatory responsibilities.
- At that time, NNPC’s primary function was to oversee the regulation of the Nigerian oil industry, with secondary responsibilities for upstream and downstream development.
- Between 1978 and 1989, NNPC constructed refineries in Warri, Kaduna and Port Harcourt and took over the 35,000-barrel Shell Refinery established in Port Harcourt in 1965.
- In 1988, the Nigerian government divided the NNPC into 12 subsidiary companies in order to better manage the country’s oil industry. The majority of Nigeria’s major oil and natural gas projects were funded through joint-ventures with the NNPC.
- A 2010 joint report by Transparency International and Revenue Watch Institute found that NNPC had the poorest transparency record out of 44 national and international energy companies examined.
- The NNPC received a score of zero - the only company to do so - in the category of “organizational information disclosure”, a measure of the transparency of a company’s deals and partnerships.
- The NNPC also received a score of zero, along with eight others, for disclosing its anti-corruption programs. Previous reports had uncovered various other questionable practices undertaken by the NNPC, including the misappropriation of funds intended for state coffers and a willingness to issue incomplete revenue reports.
- More recently, a parliamentary report in May uncovered a $6.8 billion fraud involving Nigeria’s fuel subsidy, which is partly run by NNPC. The report said NNPC was accountable to no one. It said the company owed the government 704 billion Nigerian naira ($4.34 billion) for subsidy violations and that it owed oil traders some $3.5 billion in unpaid bills.
- The government has been planning to transform NNPC into a more profit-driven company that can seek out private funds in the market. While these discussions have been underway for many years, the final draft of a Petroleum Industry Bill (PIB), has now been approved by Nigeria’s cabinet.
- The PIB was designed to reform the whole hydrocarbon sector and unblock billions of dollars of stalled investment into exploration and production. The bill includes plans to partly privatize and list the state oil company, creating an independent National Oil Company which would take over some of the current infrastructure owned by the government.
Sources: Reuters/www.nnpc.com/Transparency International/allafrica.com/Global Insight/EIA (Reporting by David Cutler, London Editorial Reference Unit)