The Federal Government lost $21 billion (about N7 trillion) to foreign oil firms in the past twenty years, according to the upper chamber of the National Assembly.
This came to light on Wednesday during plenary session.
The lawmakers noted that losing that huge amount of money in the past twenty years was as a result of the non-review and amendment of the Production Sharing Contract (PSC) Act.
The revelation followed a motion by the vice chairman, Senate Committee on Petroleum Resources, Ifeanyi Ubah, titled, ‘Urgent Need to Review and Recover Additional Revenue Accruable to the Government of the Federation from the Production Sharing Contracts Pursuant to Section 16 of the Deep Offshore and Inland Basin Production Sharing Contract Act.’
The Senate, in its resolution, mandated its committees on Petroleum Resources (Upstream); Judiciary and Legal Matters, and Finance “to investigate the reasons for the failure to review the salient provisions of the PSC Act, identify the best fiscal regime for the PSCs, and review the provisions of the PSC Act to ensure that beyond the crude oil price of $20, the share of the Federal Government of Nigeria in the additional revenue is adjusted in accordance with the provisions of the Act”.
Leading debate on the motion, Ubah noted that the Federal Government had lost several billions of dollars in potentially accruable revenue due to the non-review and amendment of the salient provisions of the Deep Offshore and Inland Basin Production Sharing Contract Act Cap D3 LFN 2004, and especially section 16 of the Act which regulates the sharing of additional revenue between the Nigerian National Petroleum Corporation (NNPC) and the various Production Sharing Contract oil companies.
He explained that PSC was a contractual arrangement for petroleum exploration and production whereby the state, as owner of the petroleum resources, engages a contractor to provide technical and financial services for exploration and production operations for an agreed share in profit oil after payments of royalty, cost, and tax oil.
He said: “This contractual arrangement was offered by the Federal Government of Nigeria in the 1991 licensing round and its term was codified into a legislation namely, the Deep Offshore and Inland Basin Production Sharing Contract Act Cap D3 LFN 2004 (PSC Act), which became effective on January 1, 1993.”
Ubah further noted that Nigeria presently has seven fields from the 1993 PSCs which are currently in production, namely: (a) Abo (OML 125) – operated by ENI; (b) Agbami-Ekoli (OML 127 and OML 128) – operated by Chevron; (c) Akpo and Egina (OML 130) – operated by Total and South Atlantic Petroleum; (d) Bonga (OML 118) – operated by Shell; (e) Erha (OML 133) – operated by ExxonMobil; (f) Okwori and Nda (OML 126) – operated by Addax, and (g) Usan (OML 138) – operated by ExxonMobil.
He disclosed that the PSCs contribution rose from 0.50% (4,000,348 barrels) to 18.70% (193,143,992 barrels) per annum between 1998 and 2005, and that its contribution has grown since the year 2006 from 18.37% (188,479,413 barrels) to over 39% (199,254,000 barrels) per annum in 2018.
“In spite of the high contribution of PSCs to total production, the contribution of revenue per barrel of PSCs oil in terms of government take is significantly lower than the contribution of revenue per barrel of Joint Venture oil largely because of the harsh and inequitable terms of the Production Sharing Contracts and the failure to review the salient provisions of the PSC Act.”
In his remark after the resolution of the Senate, the President of the Senate, Ahmad Lawan, said Nigeria’s economy would gain significantly if the Act was reviewed and amended.
He said: “The monies can be injected into financing the 2020 budget. This is one important and patriotic motions we have taken so far in the ninth Senate.
“Let me say that tomorrow (Thursday), the bill that needs to be amended is coming up for consideration for second reading, and I believe what we need to do is to give it the most expeditious consideration ever.”