By Abdul Rahman Suagibu –
NEW AFRICA BUSINESS NEWS, Freetown, Sierra Leone- Nigeria, Thursday 10th October, 2019 the Attorney General announced that, the federal government is asking for $ 62 billion from oil companies according to regulations that allow the government to revisit revenue-sharing deals on petroleum sales if crude prices exceed $ 20 a barrel.
“Computing the amount that should be credited to the Nigerian government if the law was effectively applied, that translates to around $ 62 billion against the International Oil Companies,” Abubakar Malami noted.
Oriental News Nigeria, reports that the Production Sharing Contracts (PSCs) were entered in good faith for the purposes of advancing the Economy of this great country Nigeria and the profit motive of the contracting parties.
At a certain time, when Nigeria experienced her physical weakness in revenue with particularity to the huge capital involved in setting the oil production course; the Oil companies unanimously agreed to source funds to invest in the business not minding its unpredictable nature and that is hugely commendable. However this was done under a documentation called Production Sharing Contract (PSC).
The contract states clearly and firmly that, if oil is found and produced; the oil companies which have invested extremely good amount will be allocated a small part of the oil for royalty, whilst another portion for cost of their investment and another percentage for tax and then the final fraction becomes the profit oil. At the time these contracts were entered, the price of crude oil was at $9.50 per barrel.
The production sharing contracts are administered by the laws of the Federal Republic of Nigeria. Therefore, the law on the subject is the Production Sharing Act, then a decree effective from 1993. There are very important clauses under this law in Section 16 (1) and section 16 (2).
Much more importantly, Section 16 (1) which is in focus here stipulated that “if at any time the price of crude oil exceeds $ 20 per barrel in real terms, the share of the Federal Government of Nigeria in the additional revenue shall be reviewed to make it economically more advantageous to Nigeria’’ while section 16(2) specified that after a tenure, the national assembly shall review the Act.
However, subsection 1 of section 16 does not require the intervention of the national assembly. Instead it imposes a duty on the oil companies and contracting parties, led by NNPC to by themselves review the sharing formula so as to make it more economically advantageous to the Federal Republic of Nigeria.
Thus, failure to obey rules and adhere to this clause either by dereliction of duty or by mischievous tendencies that neither party reviewed the sharing ratio to be more economically viable to Nigeria as stated in the PSCs even when oil prices have exceeded $ 20 per barrel.
Certainly, when Nigeria Agip Energy first struck oil, the price of oil was already at $ 28.50 per barrel. In putting the ceiling $ 20 per barrel, it was presumed that oil prices will not be able to exceed twice its price at then. That is, $ 9.50 per barrel. Thereafter, the oil prices kept rising. It got to $ 60 per barrel when SNEPCO got oil, $ 65.00 per barrel when Total/Elf got oil and it got to $ 95.00 per barrel when SNEPCO got oil at Bonga, yet no party cared to effect the terms of the binding contracts.
Section 162 of the constitution of the Federal Republic of Nigeria required that 13 % of the crude oil revenue earned by the country should go to the oil producing states.
For New Africa Daily News Abdul Rahman Suagibu Reports, Africa Correspondent