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Millions Lost: Liberia Short-changed Over Oil Seismic Data Money

Monrovia – FrontPageAfrica has reliably learned that the US-based seismic data company, TGS NOPEC, has been financing the cash-strapped National Oil Company of Liberia for the last three years from money reportedly owed the Government of Liberia.


Report by Rodney D. Sieh, rodney.sieh@frontpageafricaonline.com and Lennart Dodoo, ldodoo@frontpageafricaonline.com


Multiple sources and documents in possession of FPA confirm that an international auditing firm uncovered that TGS NOPEC owed tens of millions of United States Dollars to the government but that NOCAL, which has been headed by Cllr. Althea Sherman and a skeletal staff since the dissolution of the board by former President Ellen Johnson-Sirleaf, settled for a fraction of the amount in question.

Over the last decade or more, Liberia has been negotiating down on contract terms between NOCAL and TGS.

When the first contract was signed during the Charles Taylor-led government, FPA has learned it was a 50/50 revenue split. But each new NOCAL head in the Ellen Johnson-Sirleaf-led former government signed horrible contracts with TGS that they themselves could not read.

TGS first acquired regional multi-client 2D data in Liberia in 2001 and has since held a number of successful bid rounds.

Companies operating or sharing in offshore contracts in Liberia included Anadarko Liberia Company, Woodside Petroleum, Repsol, Oranto, Broadway Consolidated and European Hydrocarbons.

A former NOCAL employee knowledgeable of the contract confided in FPA that the management of NOCAL at the time was quite aware that the percentages negotiated on behalf of Liberia were not just.

“Some of us argued for higher percentage because though TGS was fully financing the project and bringing in their expertise, the data belong to Liberia and we deserve at least 40% of the sales,” he said.

The NOCAL source alleged the contracts were negotiated the way it went because some individuals within the top management were getting kickbacks in the form of percentages which should have originally been given to Liberia.

When contacted, Ms. Sherman declined to directly address an FPA inquiry, only stating that she has left the oil company with a clear conscience. “I leave NOCAL with a clear conscience, knowing that I worked hard to be of service to the people of Liberia.

It’s very disappointing and hurtful when attacked by people who should know better but there’s not much I can do about it. I remain prayerful and my record will speak for itself,” she said.

In 2011, former Auditor General John S. Morlu made TGS restitute millions.

But much of those funds were wasted. TGS, according to sources, was supposed to keep a separate account for Liberia sale of geological data.

Instead they commingled the funds into a single account with Sierra Leone so that audits could not easily see the true Liberia portion.

Despite the manipulation, the Morlu-led GAC managed to find the discrepancy and sent a team to Houston twice.

The Lowdown

A General Auditing Commission (GAC) audit covering the fiscal periods of July 1, 2011 to June 30, 2015 found that between 2002 and 2007, a Memorandum of Understanding (MOU) and two amendments to the MOU, regarding the sale of Liberia’s 2D Seismic Data, were entered into between NOCAL and TGS-NOPEC Geophysical Company based in Texas, United States of America.

Under the MOUs, TGS-NOPEC acquired, processed, and interpreted seismic data offshore of Liberia approximately 9,382 kilometers from deep water.

Under the 2002 MOU, though NOCAL was required to be paid 50% share from proceeds generated by the licensing of the seismic data, only 10% share was remitted to NOCAL’s account. As a result US$305,680.03 covering transactions undertaken from 2002 to 2008 which accrued to NOCAL was not remitted to NOCAL’s account.

Inclusive of this amount was the miscellaneous receipts associated with sales of 2D Seismic Data, which were not reported to NOCAL. Accrued interest thereon (i.e. 14% at CBL rate for lending to commercial banks) as a consequence of TGS-NOPEC withholding of NOCAL’s portion of revenue from 2002 to 2007 was US$42,795.20, thus bringing the amount due NOCAL to US$348,475.23.

Similarly, US$1,034,858.41 payable to NOCAL from the sale of seismic data between 2002 and 2008 was not remitted to NOCAL until October 2008. Accrued interest on this amount withheld (i.e. 14% of unremitted revenue) totalled US$144,880.17. TGS-NOPEC, in a number of situations, disregarded the provisions of the MOUs entered into with NOCAL, the audit observed.

According to the GAC report, there was also no evidence that NOCAL’s Management intervened to make TGS-NOPEC compliant despite knowing that TGS-NOPEC non-compliance would impact the development of Liberia’s oil and gas industry and thus deny economic benefits that could accrue to the people of Liberia.

NOCAL Management did not provide clarity regarding its default in the opening of the Escrow account for revenue remitted by TGS-NOPEC.

Communications in possession of FPA regarding ultra-Deep-Water 2D Seismic Survey, well logs and Data Management Project Agreement dated 4 August 2009, several issues were raised against TGS NOPEC ranging from the wrong application of rates applied on 2D PSDM revenue share to monies underreported.

The summary tab of the revenue share report picked the wrong formula resulting in an amount of US$10,500 being recorded as NOCAL’s share of revenue under the Revenue Sharing Agreement between NOCAL and A2D Technologies, Inc. (A2D) dated 20 July 2006. The correct amount that should have been recorded is US$186,150.

The correction of the error resulted in NOCAL’s share of revenue increasing by US$175,650 to US$186,150.

In its response to the discovery, TGS acknowledged that an error occurred in the calculation and that the total revenue share due to NOCAL from well log sales should be US$186,150.

The revenue share report shows that TGS had allocated revenue arising from a number of invoices in the ratio of 10% to NOCAL and 90% to TGS until TGS reached cost recovery of US$400,000.

Subsequent to cost recovery, TGS allocated revenue 60% to NOCAL and 40% to TGS.

The post recovery point revenue sharing ratio of 60% to NOCAL and 40% to TGS is inconsistent with Article 4.1 referred above which requires all revenues from the old data after 4 August 2009 to be shared 65% to NOCAL and 35% to TGS.

The cost recovered by TGS of US$400,000 is also inconsistent with the contract as TGS is responsible for all costs in connection with old data services.

The use of the inappropriate rates and cost recovery resulted in NOCAL’s revenue share being understated by US$374,661.29.

In its response, TGS reported that the invoices relating to charges generated from PSDM Data, which falls outside of the scope of the 2D Project Agreement 2009, as it is neither “Old Data” nor “New Data” within the terms of the Agreement.

“Nevertheless, as this data is not addressed by the 2D Project Agreement 2009, TGS has, without obligation to do so, calculated cost recovery and revenue sharing in accordance with the parameters for New Data in the Agreement.”

“Old Data” is defined in the 2D Project Agreement 2009 as:  “Any NOCAL’s geophysical data from any source including but not limited to any tapes, reports, interpretation, seismic, gravity, magnetic and well logs data, whether digitized or not, acquired, produced, or obtained prior to the Effective Date of this Agreement, in the possession of TGS for and on behalf of NOCAL under any previous arrangements, agreements or MOU” (Emphasis added).

In particular, “Old Data” were data that had been processed using time migration processing techniques (PSTM).  PSDM Data is not Old Data because it is a new product produced by TGS after the Effective Date through separate processing techniques using depth-migration, and thus could not have been in the possession of TGS under any previous arrangements, agreements, or MOU. Therefore, the revenue sharing ratio of 65% to NOCAL under Article 4.1, and the requirement for TGS to pay related costs or expenses for Old Data Services under Article 4.2, are not applicable to the PSDM Data.

Article 1.11 of the Memorandum of Understanding (3D Multi-Client Seismic Survey Project) between NOCAL and TGS dated 26 November 2007, states that Open Block Licensing Fee means Licensing fee of US$2000/sq.km and all other fees including surveying or geophysical data acquisition fees, or sales of the data, non-exclusive licensing fees, reproduction charges in connection with the license of the data and charges and fees relating to the data and interpretations pursuant to this MOU, or the use, interest charges, viewing fees, registration, rental, transportation, delivery, ownership or operation hereof and or license fee hereunder.

In accordance with Article 2.7 of the agreement, “Trading, Licensing, Open Block Licensing and all other fees received by TGS shall be shared 40% NOCAL and 60% TGS”.

The report added that TGS-NOPEC, in a number of situations, disregarded the provisions of the MOUs entered into with NOCAL. There was also no evidence that NOCAL’s Management intervened to make TGS- NOPEC compliant.

“TGS-NOPEC non-compliance would impact the development of the Oil and Gas Industry in the Republic of Liberia and thus deny economic benefits that could accrue to the people of Liberia. NOCAL Management did not provide clarity regarding its default in the opening of the Escrow account for revenue remitted by TGS-NOPEC.”

Additionally, GAC auditors discovered two outstanding payments, totalling US$454,000.00, from the Revenue Report of TGS-NOPEC and sales invoices submitted by TGS-NOPEC.

This amount was owed by Mittal Investment and Hong Kong Tai Petroleum International Corporation since 30 June 2008. “TGS-NOPEC has, on account of the audit conducted, and remitted US$1,266,102.59 out of US$1,655,965.36 assessed, as outstanding revenue since 2002 into NOCAL’s account.

This amount was assessed by me as TGS-NOPEC paid. During the course of the audit, I noted that TGS-NOPEC has made significant improvement in reconciling NOCAL’s account and remitting promptly the share of revenue due NOCAL.”

The findings noted: “As indicated in the report, records on NOCAL revenue sharing with TGS-NOPEC were found inadequate due to the records not indicating details of revenue generated for each given period with the necessary adjustment, including discounts allowed and additional fees charged to clients’ accounts.

The records provided revealed summary of revenue amounts year by year with no indication of references/ folio numbers, which could lead to omissions, thus providing opportunities for manipulation of the records. As a result, it was impracticable to render opinion on the financial statements regarding NOCAL revenue sharing.”

The auditors recommended at the time that NOCAL Management, in its dealings with TGS-NOPEC, should establish and insist on transparent processes to ensure that financial records and reports regarding NOCAL’s revenue sharing are accurate and complete.

“NOCAL Management should also incorporate in its agreement with TGS-NOPEC on the development of the oil and gas industry in the Republic of Liberia, measures to ensure independent review and monitoring of accounting and reporting functions, and that these are performed on a regular and timely basis.”

 






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