Wednesday, 22 May 2013
NNPC Crude Oil-For- $1.5bn Loan Collateral: A Fraud Alert? By Ifeanyi Izeze
That the Nigerian National Petroleum Corporation (NNPC) went for a $1.5 billion (N240 billion) syndicated loan to help it pay debts for fuels already supplied was an obvious paradigm shift in managing the controversies and of course with the associated corruption from Nigeria’s over 80 percent dependence on imports for our domestic fuel needs.
The loan, Reuters said, was provided by several Nigerian and international banks and brokered by Standard Chartered. But this is where the real issue lies: the loan will be paid back over five and half years and NNPC has put up 15,000 barrels per day (bpd) of its share or produced crude oil as collateral.
If collateral as defined by Webster English dictionary is “security pledged for the payment of a loan,” then there is a big question mark over the 15, 000 barrels per day (bpd) crude oil allocation ceded as the collateral. Rather than this daily off-take 15, 000 barrels, the creditors would have been talking of a fixed one-off volume of crude oil in case the corporation defaults in the repayment terms. There is something very blurred here.
First, this volume of crude oil, is it going to be warehoused somewhere maybe in the custody of the creditors/NNPC or is it going to be disposed on daily basis? If it’s going to be sold, who takes the proceeds-NNPC or the creditors?
We need to address these issues because 15, 000 bpd of Bonny Light at $110 per barrel which is the conservative average of the selling price of the nation’s premium grade for over four years running, will generate about $3.267 billion within the five and half years lifespan of this loan.
If we pay over $3 billion as collateral for a $1.5 billion loan, is the NNPC also expected to pay back the loan with the accruing interests?
Except they are saying the 15, 000 bpd collateral will start running any day or month the NNPC defaults in the repayment agreement terms. And even with that, another fraud teaser is that you can be assured that whosever packaged this deal will deliberately cause default so that the evil scheme of robbing this nation of 15, 000 bpd of its crude oil will be actualized.
Why can't the federal government grant low- interest loans and tax waivers to the 18 companies already licensed to build new refineries across the country instead of going abroad to borrow $1.5 billion to pay commodity traders to sustain foreign refineries?
Why is the NNPC not borrowing to fully bring back onstream the three existing name-plate refineries or to build new ones?
Since the corporation has statutory backing to source fund even from hell, why is the NNPC not borrowing to explore new acreages including those in new frontiers- deep offshore and inland basins where unavailability of fund has always been adduced as reason for inactivity in these frontiers?
When last did the NNPC make any serious investment in any upstream project minus its participation in the existing joint venture relationships where it always cries for difficulty in living up to its cash call obligations?
Does NNPC have any meaningful acreage it explored, developed and producing from apart from Oredo which could best be described as a marginal farm -out? Why are they not borrowing to do all these to put them on the same pedestal with state-owned oil companies of other OPEC countries since Sections 6 (1)(c) and 8 (1)(2) of the NNPC Act authourises it to borrow in the exercise of its functions?
It was as far back as 2008 that I raised the concern that “the entire crude-for-product-swap arrangement looked suspicious, especially as it originated from the NNPC (London Office) and the Presidency the two- in-one unit that collaborated in the recent past (and still fully collaborating) to administer oil earnings in manners that could best be described as blurred and at worst obscured.”
First, the NNPC lied when it said it was in 2010 that the corporation resorted to crude oil swaps in exchange for refined products with commodity traders, particularly with the Dutch-based Trafigura. The crude –for-product swap has nothing to do with NNPC’s inability to meet its obligations to oil suppliers. This is the truth, he whole truth and nothing but the truth.
It was another lie that NNPC embarked on the crude-for-refined products deals as a means of “meeting petrol supply requirements for domestic consumption, as it was cash-strapped and incapable of financing imports previously handled by foreign traders.”
As far back as 2008 I raised an alarm that “in order to offset its debts to Trafigura, the NNPC entered into a processing contract with the trader that allows Trafigura lift 60,000 barrels of NNPC’s crude oil daily in exchange for refined products shipped from Trafigura’s SIR Refinery in Cote d’Ivoire and other locations.”
Other companies that handle NNPC swaps were Aiteo Oil belonging to Mr. Benny Peters; Televaras, linked to Mr. Igho Salome; Ontario Oil, whose vice-chairman, Mr. Walter Wagbatsoma, has been charged along with his firm to a Lagos High Court by the Economic and Financial Crimes Commission (EFCC) for allegedly defrauding the subsidy scheme; and Sahara Energy Limited.
Each of the companies swapped an estimated 30,000 bpd in exchange for refined petroleum products on behalf of NNPC.
But is it not shameful that rather than fashion ways of achieving sustainable local refining capacity for domestic and export purposes, the NNPC is more concerned with guaranteeing full production capacity for foreign refineries and adding values to those economies through employment creation for their citizens at the expense of the armies of unemployed young Nigerians? This is a big disappointment and the successive PDP governments should be ashamed for misruling this country.
Invariably all the bravados about bringing back Kaduna, Warrri and Port Harcourt Refineries to full capacity utilization were mere gimmicks to deceive Nigerians and waste more of the nation’s highly needed resources. I talk only as a concerned Nigerian. God help my country, Amen!
(IFEANYI IZEZE can be reached on: firstname.lastname@example.org; 234- (0)8033043009)
The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of SaharaReporters