Report Reveals How NLNG Denied Inspectors Access to Export Terminals in Four Years

Details of how the Nigeria Liquefied Natural Gas (NLNG) refused to grant the PRE-shipment Inspection Agents (PIAs) and Monitoring and Evaluation Agents (MEAs) access, thereby stalling export monitoring and inspection have emerged.

This was disclosed in a report by the Auditor General of the Federation dated June 29th, 2022, a copy of which was obtained yesterday.

The report was focused on pre-shipment inspection and monitoring of crude oil and gas exports by the Federal Ministry of Finance, Budget and National Planning spanning between January 2016 and December 2020, with reference number 747/99/CONF/VOL.II/75.

Signed by the former auditor general of the federation, Adolphus Aghughu, the report had since been submitted to the National Assembly.

The pre-shipment inspection export act in some relevant sections stipulates that no goods shall be exported unless inspected by relevant agents. 

Section 1 of the Pre-Shipment Inspection of Export Act states thus: “As from the commencement of this Act, no goods to which this Act applies shall be exported from Nigeria unless an inspecting agent appointed pursuant to section 12 of this Act has issued in respect of the goods Clean Certificate of Inspection to overseas buyers of the goods”.

Also, section 18(1) of Pre-Shipment Inspection of Export Act also states that: “Any person who, at any time after the commencement of this Act, knowingly export goods liable to pre-shipment inspection under this Act otherwise than in compliance with the provisions of this Act is guilty of an offence under this Act.”

But according to the report made available to the national parliament for immediate action, the, “audit team noted during review of Inspection and Monitoring Agents’ annual reports for 2016 — 2020, that Nigeria Liquefied Natural Gas Limited (NLNG) has continually refused PIAs and MEAs access to the Terminals under its control to carry out inspection and monitoring activities as required by the Act.”

It added that: “Also, the operators of Puffin (Floating Production Storage and Off take (FPSO)) Terminal located on Ajeoil field and Zaffiro Terminal being operated by Mobil/NNPC, located outside Nigeria in the Equatorial Guinea under the inspection of Trobell International Nig. Ltd and Robinson international Energy Limited could not be accessed for inspection.”

Expressing concerns over the non-usage of metering equipment at export terminal, the report also revealed that: “Section 52(1) of Petroleum (Drilling & Production) Regulations of 1969 stipulate that ‘the licensee or lessee shall, with volume and gravity correction to sixty-degree Fahrenheit and by a method or methods approved by the Director of Petroleum Resources in writing, measure or weigh — (a) all crude oil won and saved and casing head petroleum spirit recovered from relevant area; and (b) all-natural gas sold.

“Measuring equipment meant to guarantee accuracy of quantity and sample collection for quality testing is either not available or used at terminals because DPR as a regulatory authority has not provided and enforced its usage were available.

“The manual method of arriving at quantity and sample collection is prone to error and can lead to inaccurate records. 

“Also, section 52(2) of the Regulation stipulates that ‘he Director of Petroleum Resources or an officer authorised by him shall have the right to be present whenever any such measurement or weighing take place. Interviews conducted with the Managing Directors and staff of PIAs and MEA revealed that Okono terminal does not have metering equipment since 2012.

“It also revealed that Ebok and Forcados terminals do not use the available metering equipment to measure quantity during Fiscalisaton and Defiscalisation exercise.”

However, the Federal Ministry of Finance, Budget and National Planning in its response to the query as quoted by the report said that NLNG relied on the existing law which made it difficult to comply with demand by the auditor general.

“NLNG is relying on some guarantees/assurance in the existing law that established NLNG which they posited made it difficult for the company to comply with the Pre-Shipment Inspection Act No. 10 of 1996. The Ministry in order to redress the situation, convened a meeting between the officials of Nigeria Liquefied Natural Gas (NLNG), the Pre-Shipment Agent (PIA) Monitoring and Evaluation Agent (MEA) on Gas exports and representatives of the Ministry on the 13″ October, 2021 and the issues presented, are being addressed by the Ministry.

“However, It was revealed from the meeting, that the framework which guides investment portfolio of NLNG which is referred to as “investment Protection Law of 1989″ cum MOU was signed with investors and the Federal Government of Nigeria, Precludes NLNG’s revenue from taxes, which they claimed to had been affirmed by FMFB&NP, CBN and the Attorney General of the Federation with an additional clause to maintain status-quo. The interface is on-going.”

Also commenting on the non-usage of metering equipment at Export Terminal, the report quoted the ministry as saying that, “all terminal operators own the equipment needed at the terminal to measure quantity and quality of crude oil exports.”