Pan Ocean, Shoreline, Yinka Folawiyo default in royalty payments to FG – Report

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Oil firms yet to respond, NNPC committee continues investigation

Three oil and gas companies – Pan Ocean, Shoreline and Yinka Folawiyo – operating in Nigeria did not pay royalty to the Federal Government in 2016, according to latest audit released by the Nigeria Extractive Industries Transparency Initiative, NEITI.

In the 2016 Oil and Gas Audit, obtained by Vanguard, NEITI specifically stated that Pan Ocean Oil Corporation (Nigeria) Limited failed to make any financial payments in 2016, despite being in Joint Venture (JV) arrangement with the Federation. “The non-payment by these companies will result to revenue loss to the federation. It is worthy to note that Pan Ocean did not make any financial payments in 2016, despite being in JV arrangement with the federation,” NEITI noted. Going by the fact that the issues were still unresolved three years after, NEITI, therefore, called on the Department of Petroleum Resources, DPR, to investigate the non-payment of royalties by these companies and ensure the funds are recovered as appropriate. Pan Ocean and Yinka Folawiyo Petroleum Company Limited were also listed among 31 companies that defaulted in the payment of Education Tax, EDT, in 2016. Particularly, NEITI said: “The Education Tax, EDT, payment dropped by 52.4 per cent from $667.77 million in 2015 to $317.853 million in 2016. It is noteworthy that 31 companies did not make EDT payments in 2016.

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“The following are the companies as well as reasons given for non-payment: Eight companies, namely: Network Exploration & Platform, Frontier Oil, Newcross Petroleum, Elcrest, Shoreline, Neconde, Platform, and ND Western, were granted pioneer status and therefore exempted from payment of EDT.

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“Seplat, SA Petroleum, Universal Energy, and Sterling Global are Production Sharing Companies, PSC, which did not pay EDT due to cost recovery. While Allied Energy, Belema Oil, Brittania-U, Dubri Oil, Energia Limited, Express, Midwestern, Pan Ocean, Sheba, and Yinka Folawiyo were defaulting companies as at 31 December 2016.” NEITI further indicted Pan Ocean over the non-payment of Petroleum Profit Tax, PPT, in 2016, along with some other companies. The agency said: “The following companies defaulted in tax payment in 2016; Allied Energy, Belema Oil, Brittania-U, Dubri Oil, Energia Limited, Midwestern, Pan Ocean, SA Petroleum, Seplat, and Yinka Folawiyo.

“Express Petroleum and Sheba Petroleum did not provide relevant information to the audit. This leads to revenue loss to the federation. Federal Inland Revenue Service, FIRS, should carry out tax audit of these defaulting companies.

“There is need for the Federal Ministry of Finance to task FIRS to provide a status update on all companies and their outstanding liabilities till date.”

Furthermore, NEITI disclosed that Pan Ocean owed the NNPC an outstanding debt of $135.8 million since 1985, while it called for an independent valuation of Pan Ocean indebtedness to determine the true fair value of interest thereon. NEITI said: “Pan Ocean had a participating agreement with NNPC to explore and produce oil from Oil Mining Lease, OML, 98 as an operator for itself and on behalf of NNPC. This agreement was dated August 1st, 1979 and the distribution of the participating interests are as follows: NNPC 60 per cent and Pan Ocean 40 per cent. “There is an outstanding debt of $135.793 million due from Pan Ocean to NNPC. Recovery of only the principal debt amount put at $135,793 million without consideration of interest, results to a loss in the time value of money.

Meanwhile, NEITI stated that the NNPC had constituted a committee on the recovery of interest accrued on the indebtedness. However, the companies could not be reached over the weekend, as they did not respond to Vanguard’s calls and emails. But a message obtained by Vanguard from its website showed that Pan Ocean Oil Corporation Nigeria Limited was incorporated in 1973. It stated: “Since then, it has been operating as an exploration and production company in a Joint Venture with the Nigerian National Petroleum Corporation, NNPC, on-shore the northern fringe of the Niger-Delta. “Its Oil Prospecting License, OPL – 71 was converted to Oil Mining License, OML-98 on December 01, 1975. Crude oil production commenced in August 1976 at the Ogharefe field of OML 98. As a Joint Venture, JV partner, the NNPC has 60 per cent working interest in OML-98 while Pan Ocean has 40 per cent.”

In another message obtained from its website, Shoreline stated: “Shoreline Natural Resources leveraged on the divestment plans of the Shell Petroleum Development Company Limited to sell its participating interests in some assets located in Nigeria. On 4th November 2012, Shoreline Natural Resources acquired 45% Participating Interest of SPDC in Oil Mining Lease, OML 30.

“The Nigerian Petroleum Development Company, NPDC, a subsidiary of NNPC, holds the remaining 55% Participating Interest in the OML 30 licence. OML 30 is located onshore in the Delta region, less than 30km east of Warri in Southern Nigeria. The licence covers 1,097 square kilometres and includes eight producing fields with oil and gas contained in numerous stacked reservoirs. Shoreline Natural Resources is in partnership with NPDC to develop OML 30 to its full potential.”

Yinka Folawiyo Petroleum also stated at its website that: “in June 1991, the company was granted an Oil Prospecting License (OPL) 309 as a Sole Risk Contract under the Nigerian government’s Indigenous Allocation Programme, put in place to encourage the development of a locally owned and operated Nigerian upstream oil industry.”

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