Nigeria to recoup $1.5bn from neglected oil production sharing contract

.As Senate passes amended PSC Act bill 16 years after

With the passage of a bill amending the sharing formula of excess proceeds from oil production in the joint venture agreement between Nigeria and international oil companies, the country stand the chance of earning at least N1.5 billion annually starting from 2020.

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This was as the Senate on Tuesday passed within a month, the Deep Offshore and Inland Basin Production Sharing Contact CAP D3 LFN 2004 Act Bill 2019 (SB 21).

The passage of the bill followed the presentation and considerations of 17 clauses of the report of the Senate joint committees on Petroleum Upstream, Finance, Judiciary and Gas Resources by its Chairman, Sen. Akpan Albert Bassey (Akwa Ibom North East).

The bill seeks to amend section 5 of the PSC Act to bring the provisions of that section into conformity with the generality of provisions of the Act and into congruence with the intendment and essence of Production Sharing Contracts.

Highlights of the amendments and review of the Deep Offshore and Inland Basin Production Sharing Contract Act Cap 03 LFN 2004 undertaken by the Joint Committee include amendment of the provisions for payment of royalty which requires that all licences and leases holders in the deep offshore shall pay stipulated royalties irrespective of the water depth or terrain of their operation.

Others are adoption of a regime of royalty by price to ensure that royalty payable is reflexive in accordance with the changes in the price of crude oil, condensates and natural gas; Inclusion of clause mandatory periodic review of the PSCs, and Inclusion of offences and penalty clause to deter persons from flouting the provisions of the Act.

Recall that the Senate on Wednesday, 2nd October, 2019, debated a motion on the ”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 Cap 03 NW 2004 and amend the Extant Act”.

It mandate the Committees on Petroleum Resources (Upstream); Judiciary, Human Rights and Legal Matters; and Finance to find out the reasons for the failure to review the salient provisions of the Production Sharing Contracts Deep Offshore and Inland Basin Production Sharing Contract Act Cap 03 LFN 2004, identify the best fiscal regime for the PSCs; and Review the provisions of the Deep Offshore and Inland Basin Production Sharing Contract Act Cap 03 LPN 2004 to ensure that the share of the Federal Government (FGN) in the contract is adjusted in accordance with the provisions of the amend Act.

The amendment bill was tabled before the Senate and read the first and second time on October 3 and 8 2019 respectively.

Following the second reading, the bill was transmitted to the Joint Committees on Petroleum Resources (Upstream), Gas Resources and Finance for further legislative action.

Senate President, Ahmad Lawan, justified the Senate resolve to amend the law on Production Sharing Contract in the oil industry which was in tune with executive request from President Muhammadu Buhari for the review to shore up revenue for the country.

Lawan said “it has become absolutely necessary for us to do so as a country so that we can generate more revenues from our endowments.”

The Senate President said that the Senate, in the process of carrying out the amendment, was mindful of the need to maintain a competitive environment for businesses to continue to thrive and strive to ensure that the Oil and Gas business in Nigeria remain profitable.

“We want to attract more investments and therefore it is absolutely necessary that we engage in a process that we produce a win-win situation” for Nigeria and the business concerns in the oil and gas industry.

According to Lawan, the passage of the bill is a precursor to the determination of the legislature to pass the Petroleum Industry Bill next year.