The Federal Government yesterday took another drastic step to redeem its precarious financial status as the Minister of Justice and Attorney General of the Federation, Abubakar Malami, vowed to recover “colossal” sums of money from oil majors operating in the country.
The minister according to enregy analysts is basing his revenue claims on regulations that allow the government to revisit revenue sharing from petroleum sales whenever crude price exceeds $20 a barrel.
Though Malami failed to disclose the amount being expected, figures from the Nigeria Extractive Industries Transparency Initiative (NEITI) indicated that an estimated $16 billion is being targeted from its various oil Production Sharing Contract (PSC) agreement with International Oil Companies (IOCs).
A 1990 law that governs oil PSC allows the government to review revenue sharing once the oil price rises above $20 per barrel.
Asked about government’s demands to recover revenue from IOCs, Malami said the sums in question were “huge”.
“We are taking steps to recover what we feel is due,” said Malami, adding he could not give a precise figure as multiple actions and suits were underway.
“One thing I can say is that the amount is substantial and colossal, there is no doubt about it,” said Malami, not naming the companies.
Earlier this year, industry and government sources had said that Royal Dutch Shell, Chevron, Exxon Mobil, Eni, Total and Equinor were each asked to pay between $2.5 billion and $5 billion to the Federal Government.
A spokesperson for Shell in Nigeria said on Monday, “We do not agree with the legal basis for the claim that we owe outstanding revenues and the matter is pending before the court.”
Exxon declined to comment, while Eni, Total, Equinor and Chevron did not immediately respond to requests for comment.
Governor of Central Bank of Nigeria (CBN), Godwin Emefiele, who was also part of the delegation, accused oil majors of foot -dragging on purpose rather than initiating a review once oil prices crossed the $20 per barrel threshold.
“You think it should be forgotten and we shouldn’t revisit it given that it resulted in substantial loss of revenue to the government?” said Emefiele.
“It stands for me to reason that the IOCs deliberately did not trigger events for review because it benefits them – and that is something that we kick against.”
NEITI had in a report released in March said that Nigeria lost at least $16 billion in 10 years due to non-review of the 1993 PSC with oil companies.
The report tagged, “The Steep Cost of Inaction” said that the losses were recorded between 2008 and 2017. The study done in conjunction with Open Oil, a Berlin-based extractive sector transparency group, found that the losses could be up to $28 billion if, after the review, the federation were allowed to share profit from two additional licenses.
NEITI, therefore, called for an urgent review of the PSCs to stem the huge revenue losses to the federation. It added that the review was particularly important for Nigeria because oil production from PSCs had surpassed production from Joint Ventures (JVs) with PSCs now contributing the largest share to federation revenue.
“Between 1998 and 2005, total production by PSC companies was below 100 million barrels per year while JV companies produced over 650 million barrels per year. By 2017, total production by PSC companies was 305.800 million barrels, which was 44.32 per cent of total production. Total production by JV companies was 212.850 million barrels, representing 30.84 per cent of total production,” it said.
NEITI stated that the Deep Offshore and Inland Basin Production Sharing Contracts provided for a review of the terms on two conditions.
Source: The sun
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