From Juliana Taiwo-Obalonye, Abuja
The Federal Executive Council (FEC) has approved the amendment of Section 15 of the Production Sharing Contract (PSC) law, which none implementation has cost the nation an estimated $21billion (about N7.602trillion) in revenue to International Oil Companies (IOCs).
When the Act is amended, close to $2 billion (about N700 billion) extra revenue will be earned for the federation.
The Minister of State for Petroleum Resources Dr. Ibe Kachikwu, disclosed this to State House Correspondents at the end of the over five-hour Council meeting presided over by Vice President Yemi Osinbajo.
Kachikwu explained that Nigeria has in the last 20 years lost a total of $21billion (about N7.602trillion) in revenue to International Oil Companies for its failure to implement the Production Sharing Contract (PSC) law.
The Minister said council gave approval for his ministry to begin the process of reviewing section 15 of the Act which has cost the nation trillions of Naria.
According to him, 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 Joint Venture (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 ultra deep-water acreages.
As provided in the Act, the contractor bears all cost of exploration and production without such cost being reimburseable 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.
Kachikwu explained that there was a provision in 1993 that once the price of crude exceeds $20 a barrel, “the government will take steps to ensure that that premium element is then distributed at an agreed premium level for the federal government.
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”.
The minister added: “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.”