•FG now has further legal backing to pursue $62bn arrears, say analysts
•Oil majors meet Abba Kyari as Buhari insists on fairness, equity
Adedayo Akinwale in Abuja
The nation’s push to earn more revenue from oil received a major boost yesterday as the House of Representatives concurred with the Senate passage of the bill to amend the Deep Offshore and Inland Basin Production Sharing Contract (PSC) Act governing the PSC agreements between the federal government and the International Oil Companies (OICs).
The passage of the bill, according to analysts, will provide the federal government further legal backing to pursue the $62 billion claim that it claimed arose as a result of the failure to review the production sharing formula, when oil price exceeded $20 per barrel.
Perhaps jolted by the concurrence to the bill, which consideration had dragged in the federal legislature for years, the oil majors, Dexterity Portal. reliably gathered, rushed to the Presidential Villa yesterday to seek audience with the Chief of Staff to the President, Mallam Abba Kyari, who reportedly told them that all President Muhammadu Buhari was interested in was fairness and justice.
“Kyari told them that Buhari wanted fairness to Nigeria, which must recover its unpaid revenue since oil price went beyond $20, and fairness to the oil majors to recover their costs,” a competent source told Dexterity Portal.
The president’s chief aide was said to have told the oil majors to come to terms with the need to pay up the arrears, pointing out that Nigeria’s position was not unreasonable since the share of profit would depend on the price of oil, which might go up or come down.
“The current base price for sharing proceeds would have to be $57 and whatever amount it would be in future,” he was quoted to have said, adding that arrears not paid since 2014 when efforts to get a review was corruptly mired in the National Assembly would have to be paid.
The House also passed the provision of new Section (18), which provides that: “Any person who fails or neglect to comply with any obligation imposed by any provision of the bill commits an offence and is liable on conviction to fine not below N500 million or to imprisonment for a period not more than five years or both.”
The approval was based on the recommendations adopted in the report on the Bill for an Act to amend the Deep Offshore and Inland Basin Production Sharing Contract Act, Cap. D3 Laws of the Federation of Nigeria, 2004 and for other related matters.
The Bill seeks to amend the Deep Offshore and Inland Basin Production Sharing Contract Act, 2004 and to make provisions for price reflective royalties, periodic review of royalties payable in respect of Deep Offshore and Inland Basin Production Sharing Contracts as well as offences and penalty for non-compliance
After the consideration of the report at the Committee of the Whole, the bill passed through 3rd reading.
The new fiscal regime as contained in the amendment to Section 5 of the Principal Act, the House approved royalties of 10 per cent in Deep offshore greater than 200 water depth and 7.5 per cent in frontier/Inland basin.
The House also adopted royalty price in order to allow for royalty reflectivity based on changing prices of crude oil, condensates and natural gas. This also replaces the necessity for section 16 of the Principal Act.
The amendment also provides a new section 17 which states that: the Minister shall cause the Corporation to call for a review of the Production Sharing Contracts every 8 years.
“The royalty based on price shall be identical for the various water depths in Deep offshore (beyond 200metres water depth) including frontier acreages for crude oil and condensates.”
“From $0 and up to $20 per barrel – zero per cent; above $20 and up to $60 per barrel – 2.5 per cent; above $60 and up to $100 per barrel –four per cent; above $100 and up to $150 per barrel – (eight per cent) and above $150 – 10 per cent.
The Deputy Speaker, Hon. Idris Wase; Hon. Ado Doguwa, Hon. Victor Nwokolo; and Hon. Okon Archibong all spoke in favour of the bill, while the deputy minority leader, Hon. Toby Okechukwu and Hon. Isiaka Ibrahim opposed the provisions of the bill.
They called for representation of the Petroleum Industry Bill (PIB) with the view to addressing myriad of challenges bedevilling the oil and gas sector.
The federal government had earlier begun moves to recover as much as $62 billion from international oil companies, being backlog of its share of income from the PSC.
The government was basing its action on a 2018 Supreme Court judgment that would enable the country to increase its share of income from PSC.
The government accused the energy companies of failing to comply with a 1993 contract law requirement that the government would receive a greater share of revenue when the oil price exceeded $20 per barrel.
Representatives of the oil companies were said to have met with the Attorney General of the Federation and Minister of Justice, Abubakar Malami, on October 3.
But Malami told them that while no hostility is intended toward investors, the government will ensure all the country’s laws are respected.
However, the oil companies including Shell have gone to the Federal High Court to challenge the government’s claim that they owe the state any money, arguing that the Supreme Court ruling doesn’t allow the government to collect arrears.