Hi Tony,
I think you are right - it looks like the T/C sealing is not working properly anymore. Did you see anything in the cooling water? I presume the 2002
A4 has got a water cooled T/C and a sealing failure could also bring oil into the cooling water. From my knowledge there is no other way how unburned engine can get into the exhaust pipe and drops out of the end pipe.
A T/C repair might become quite expensive - therefore I hope that somebody else from our forum has another idea what needs to be checked first before you give your
A4 to an audi station.
Greetings from Germany
Juergen