The Federal Government of Nigeria has initiated moves to recover $62.2 billion (N20 trillion) from six (6) oil firms that defaulted in the payment of revenue (arrears) due to the government based on the deep offshore production sharing contracts.
It was stated that some major oil companies had not paid arrears due to the government since the signing of Deep Offshore and Inland Basin Production Sharing Contracts Act CAP D3 Law of the Federation of Nigeria 2004 (amended in 2019) for oil exploration in deep offshore and inland basins.
It was also disclosed that the case instituted by the Attorneys-General of three oil-producing states – Rivers, Bayelsa and Akwa Ibom (as Plaintiffs) against the Federal Government added to the uncovering of the arrears.
In October 2018, the Supreme Court gave a ruling with orders that the Attorney-General of the Federation and Minister of Justice should establish a body which would be the vehicle for the recovery of arrears due to the government from the Production Sharing Contracts. A top government official reaffirmed the determination to recover the N20 trillion.
“There are six oil companies involved. They have taken the nation for granted in the last 16 years by denying Nigeria of its revenue from the Production Sharing Contracts.
“We have kept the list of the firms involved under wraps to allow some understanding. But if they remain adamant, we will lay the cards on the table for all Nigerians to appreciate the havoc wreaked in the oil industry by the six companies.
“If successive administrations swept the arrears under the carpet, the administration of President Muhammadu Buhari will insist on the right thing.”
President Muhammadu Buhari has already signed the amendment to the Deep Offshore (and Inland Basin Production Sharing Contract) Act earlier after its passage by the National Assembly.
While the new amendment introduced key changes including the introduction of incremental royalty rate based on the price of oil, it also mandated a periodic review of the PSC arrangement every eight years with the government estimating that the move would help Nigeria generate additional 500 million dollars revenue in 2020.
The Act also entails that a contractor undertakes all the financial, technical and operational risks associated with petroleum operation in return for a share of profit in oil after payment of royalty, cost and tax oil.