Nigeria Loses N7.602trn Revenue to Foreign Oil Companies

Posted by George on Thu 14th Dec, 2017 - tori.ng

Nigeria has recorded a whooping loss in the oil sector in the last two decades according to figures reeled out by a junior minister.

Dr. Ibe Kachikwu,

Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has disclosed that Nigeria in the past 20 years have lost a total of $21 billion (about N7.602 trillion) in revenue to international oil companies (IOCs) for its failure to implement the Production Sharing Contract (PSC) law.

The minister, while briefing State House Correspondents after the Federal Executive Council (FEC) meeting presided over by Vice President, Yemi Osinbajo, at the presidential villa, Abuja, said Council gave approval for his ministry to begin the process of reviewing section 15 of the Act, which has been unfavourable to the Federal Government. Kachikwu said the Ministry of Petroleum Resources is to collaborate with the Office of the Attorney General of the Federation in amending the section of the Act.

The PSC is an agreement put in place in 1993 in response to the funding problem faced by the old JV arrangement as well as the desire of the Nigerian government to open up the sector for more foreign participation. It governs the understanding between the Nigerian National Petroleum Corporation (NNPC) and all new participants in the new inland deep and ultradeep- water acreages.

As provided in the Act, the contractor bears all cost of exploration and production without such cost being reimbursable if no find is made in the acreage. It also provides that cost is recoverable with crude oil in the event of commercial find, with provisions made for tax oil, cost oil and profit oil after which the balance after deduction of tax oil and cost oil which is to be shared between the NNPC and the contractor in an agreed proportion.

According to the petroleum minister, there was a provision in 1993 that once the price of crude exceeds $20 a barrel, government will take steps to ensure that that premium element is then distributed at an agreed premium level for the Federal Government. He said: “But over the last 20 years, nothing really was done. From 1993 to now, cumulatively, we have lost a total of $21 billion, just because government did not act.

“We did not exercise it. In 2013, there was a notice to oil companies that we were going to do this, but we didn’t follow through in terms of going to council to get approval.

“One of the things we’ve worked on very hard over the last 20 years is to get that amendment because once we do, the net effect for us is close to $2 billion extra revenue for the federation.”