We commend President Muhammadu Buhari for signing the amended Deep Offshore (and inland basin production sharing contract) Act. We also commend the 9th National Assembly for amending the original law that provided for the operation of oil licences in Nigeria’s deep waters, otherwise known as Deep Offshore Inland Basin Production sharing contract. Signing the Deep Offshore Act is good for the nation’s economy.
We believe that the signing of the law should be celebrated and seen as a sign of good things to come from the oil and gas sector of the econo- my. There is no doubt that the Federal Government has been grappling with the problem of the review of the terms in the production-sharing contract with the International Oil Companies (IOCs). Over the last 26 years that the original law regulating the Deep Offshore and inland basin production-sharing contract came into being, courtesy of the military regime of 1993, several attempts to amend the law had been unsuccessful due to intense lobbying by the oil majors.
According to the original fiscal terms, which were based on the oil industry’s long-term outlook, oil prices of US$20 per barrel and above should require a review of the terms in the Deep Offshore Act.
But, in spite of the fact that oil price in the international market had risen above USD20 per barrel since 2003, the international oil companies in Nigeria reportedly refused to agree to changes as provided in the subsisting law.
All this period, Nigeria failed to secure her equitable share of the proceeds of oil production. Also, during these years, rapid reductions in the cost of oil exploration, extraction and maintenance of oil fields had taken place. In other words, their profits were rarely taxed at all. Therefore, the oil companies might have profited so much from the nation’s huge losses.
It is based on the need to overhaul the oil and gas sector that the amendment to the Act by the National Assembly and its assent by the President should be appreciated. This is crucial not only in terms of bringing more revenue, but also in ensuring diversified and productive economy. In practical terms, this will provide more employment opportunities and sustainable economic growth.
With the amendment of the Act, it is expected that Nigeria will earn extra billion dollars annually. According to statistics, before the amendment, Nigeria was receiving about $268million. With the amendment and the oil price at between $55 and $60 per barrel, Nigeria will receive between $1.5billion and $2billion. It is hoped that the money would be used to fix dilapidated roads, revamp the education sector and improve the health care delivery system.
The Federal Government should use this opportunity to sanitise the oil and gas industry and make its operation transparent and accountable. We decry corruption and under-remittance to government coffers. These are against Section 162 of the 1999 Constitution, which states: “The Federation shall maintain a special account to be called the ‘Federation Account’ into which shall be paid all revenues collected by the Government of the Federa- tion.”
If transparency is enthroned in the oil and gas sector, it will be a win win situation for the government and the international oil companies. Unfortunately, this has not been the practice for decades. All along, the oil sector in Nigeria has been riddled with corruption. Unpatriotic Nigerians may have been complicit in the practice. That ugly narrative must change now.
Beyond celebrating this landmark achievement, government should seize the opportunity to ensure that the oil and gas industry is attractive to investors and competitive in a crowded international market where operations should be driven by commercial principles, transparent and free from political interference. We believe that if the oil companies play by the rules and regulations of the industry, oil-bearing states and host communities will be the better for it.
Therefore, we urge the government and the National Assembly to amend similar laws that have become archaic, inconsistent and irrelevant to our national interests. That will be the beginning of new deal for Nigeria.