Gov Audit Report On Shell – $1.79bn Discrepancy

But the company said its accounts and transactions, during the period in question, were subjected to annual audits by JV partners and no wrongdoing was found.

Daukoru had presented the audit report when he appeared yesterday before the House of Representatives’ Committee on Petroleum Resources that is currently probing an alleged underpayment by Shell in its lifting of crude oil in the country.

The House had last week threatened to issue a warrant compelling Daukoru to appear before it to explain why SPDC, among other things, allegedly under-paid the Federal Government to the tune of $3.2 billion in its lifting of crude oil.

But appearing before the House committee yesterday, Daukoru who absolved himself of any connivance with SPDC also presented a Value-For-Money (VFM) audit report to back his claim.

According to Daukoru, the aim of the VFM audit, between 1991 and 1996, was to help the Federal Government detect internal deficiencies in the running of the petroleum industry and not to witch-hunt anybody.

Highlights of the VFM report, the minister said, was for SPDC to refund the joint venture account monies in various denominations of $8.7 million, �150,000 and N455.4 million.

Daukoru, who apologised for his inability to make the audit report available to the lawmakers since January, gave a breakdown of the total amount involved as N988.6 million, $3.4 billion and �150,000 but concluded that $1.79 billion or 52 per cent of the amount, in dollar denomination, could not be resolved.

He explained to the lawmakers that the unresolved sum ($1.79bn) was subsequently referred to a ministerial committee, which comprised of himself, the Nigerian National Petroleum Corporation (NNPC), independent auditors and those of SPDC.

He further explained that the ministerial committee and the independent auditors saw the discrepancies as the result of a faulty computer application in use by SPDC (EMA 3000), and not a coordinated attempt to defraud Nigeria.

“This claim further shows the control ineffectiveness of SPDC’s foreign procurement particularly with reference to record keeping and completeness of data.

“However, it is difficult to sustain the claim in view of the fact that SPDC is requesting for more information from the auditors to enable them provide further evidence to confirm the propriety of the payments”, he said.

The minister absolved SPDC of any deliberate attempt to defraud and that the discrepancies might have arisen due to system failure because the amount involved was a third of entire Shell’s budget for the period under review.

He added that whatever the differences, it would either be reconciled or recovered from SPDC.

Responding to the minister’s submission, chairman of the committee, Dr. Cairo Ojuogboh said his committee would study the audit report, get experts’ advice before making its position public.

But Shell, in a statement yesterday said its accounts and transactions during the period in question, were subjected to annual audits by its JV partners as provided for in the Joint Operating Agreement and no wrongdoing was found.

The statement reads: “Our attention has been drawn to the proceedings at today’s (yesterday) sitting of the Petroleum Resources Committee of the House of Representatives, at which the Honourable Minister of State for Petroleum Resources, Dr Edmund Daukoru, gave evidence.

“The Committee had earlier alleged “fraudulent underpayment for crude oil lifting” by the Shell Petroleum Development Company of Nigeria (SPDC).

“This subject was first raised by the House of Representatives Committee on Petroleum Resources in November 2005. However, the Committee has since December 8, 2005, been discussing a NNPC Value for Money (VFM) audit report.

“The VFM issue was first raised in 2000 in a letter from the NNPC, following a special audit of our transactions between 1991 and 1996. We have progressed discussions on the subject with our JV partners well beyond the allegations raised in the VFM report.

“Our accounts and transactions were subjected to annual audits by our JV partners as provided for in the Joint Operating Agreement during the period in question, and no wrongdoing was found. Since 2000, we have had joint reviews of the issues raised in NNPC’s letter and we have been able to explain the basis for the misunderstandings on many of the issues.

“SPDC conducts its business in compliance with relevant regulations and the law, and in line with the Shell Business Principles, underpinned by the core values of Honesty, Integrity and Respect for People.”