Nigeria is looking for billions of dollars of lost revenue in transactions between the Nigerian National Petroleum Corporation, NNPC and International Oil Companies (IOCs).
The country’s House of Representatives has resolved to setup an adhoc committee to investigate the matter.
Why It Matters
Nigeria has reportedly lost about $21 billion crude oil revenue to IOCs as a result of the non-implementation of a Production Sharing Contract. A lawmaker Sunday Katung (PDP, Kaduna), who quoted figures earlier given by the Junior Petroleum Minister, Ibe Kachikwu, said: “These acts of negligence, omission, incompetency, if not outright collusion and conspiracy with a view, possibly to corruption have been perpetrated over such a long period of time when Nigeria has had well paid legal and technical experts in place.”
The House ad-hoc committee is expected to deliver its report within 6 weeks with the scope as follows:
- To investigate the scope of operation of the Inland Basin Production Sharing Contract (PSC) and Nigerian National Petroleum Corporation (NNPC);
- Minister of Petroleum Resources, Ibe Kachikwu to provide details of financial transactions between the NNPC and the IOCs during the period when the losses occurred;
- Review the PSC and the Joint Venture and other relevant agreements with a view to regularising all the anomalies that have led to the loss of revenue.
What Is the PSC?
The lawmaker Katung, explained:
- The Deep Offshore and Inland Basin Production Sharing Contracts Act of 1993 (PSC) was enacted in response to the problems posed by the joint venture arrangement as well as the desire of the federal Government to open up the sector to more foreign participation and further benefit the Nigerian economy.
- The PSC governs the understanding between the Nigerian National Petroleum Corporation (NNPC) and all new participants in the new inland deep and ultra-deep water acreages by which the contractor bears all costs of exploration and production without much cost being reimbursable if no find is made.
- The PSC also provided for the recovery of the cost of exploration of crude oil in the event of commercial find, with provisions made for tax oil, cost oil, and profit oil following which the balance, after these (3) deductions are made, is shared between the NNPC and the contractor in an agreed proportion
- The PSC was amended by deep Offshore and Inland Basin Production Sharing Contracts (Amendment) act of 1999.
According to Kachikwu, the Federal Government has been culpable for not showing enough will to resolve the issue but he noted that there had been previous attempts largely unsuccessful. “In 2013, although there was a notice to oil companies that government would take steps to correct this anomaly, government did not carry it through in terms of going to the Federal Executive Council to get approval.”