Executive Secretary of the Nigerian Extractive Industry Transparency Initiative, Waziri Adio, took to his personal twitter handle early Thursday morning to lament a news report quoting Dr. Ibe Kachikwu, Minister of State for Petroleum Resources as saying the nation loses N7.6tr to faulty agreements with international oil organisations operating within its territory since 1993 (24 years ago).
Adio recalled that NEITI and civil society groups like Civil Society Legislative Advocacy Centre (CISLAC) a non-governmental, non-profit, advocacy, information sharing, research, and capacity building organization, have been calling attention to this anomaly over the years.
In response to the outcry, he continued, members of the National Assembly and officials of the Ministry of Petroleum Resources had always talked “glibly about how Nigeria lost so much money for failing to implement its own laws, but it had been all talk and no action.
“All kinds of figures have been flying around on extent of loss, but that did not trigger action,” he stressed, wondering why stakeholders failed to act even at the point oil price crossed $20 per barrel in both nominal and real terms as required.
“Section 16 of the 1999 act has two trigger clauses: terms to be reviewed in a way more economically beneficial to the country when oil crosses $20/b in real terms; terms to be reviewed in a way more economically beneficial to the country after 15 years, and 5 years subsequently,” he added.
The government’s failure to act, he stressed, is just another “evidence of how we have not been fair to ourselves as a people.”
After years of playing the ostrich by government officials despite NEITI shouting itself hoarse on “the need for the review of the terms of the 1993 Production Sharing Contracts (PSCs),” he expressed seeming relief that “finally action will be taken.”
Kachikwu had while briefing the media after the weekly Federal Executive Council meeting in Abuja on Wednesday, said the government has approved an amendment of the Act, especially Section 15 for subsequent passage by the National Assembly.
“Over the last 20 years, nothing really was done. From 1993 till now cumulatively, we have lost $21 billion because government did not act, we did not exercise it. In 2013, there was a notice to oil companies that we are going to do this but we didn’t go through in terms of going to Council to get approval.
“So, one of the things we have done in the last one year is that we have worked very hard to get that amendment because once we do, the net effect for us is close to $2bn extra revenue for the Federation.”
The PSC of 1993 was in response to the funding problem faced by the old Joint Venture 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 & ultra deep-water acreages, by which the contractor bears all costs 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 is to be shared between the NNPC and the contractor in an agreed proportion.