Review production sharing agreements now, NEITI tells FG

The Nigeria Extractive Industries Transparency Initiative (NEITI) has urged the federal government to review the Deep Offshore and Inland Basin Production Sharing Agreement between Nigeria and oil companies.

NEITI said in a statement on Sunday that the urgency to review the obsolete legislation without further delay is in view of the revenue losses to the federation by the use of the old agreement in computation of revenues to be shared between the government and oil companies.

The statement signed by NEITI spokesman Dr. Orji Ogbonnaya Orji recalled that the Deep Offshore and Inland Basin Production Sharing Contracts Act of 1993 provides for,“ a review of the terms when prices of oil crosses $20 in real term; and a review of the terms 15 years after operation of the agreement and five years subsequently.”

NEITI however observed with concern that Nigeria is yet to adhere to this important provision even now that the price of oil is revolving around $70 per barrel.

In an Occasional Paper released at the weekend which reviewed three years of NNPC’s financial and operations reports, NEITI noted that crude oil production under the Production Sharing Contracts (PSCs) has since overtaken production under the Joint Venture arrangements.

A careful look showed that PSCs accounted for 44.8 percent of total oil production while the Joint Ventures (JVs) contributed 31.35 percent, NEITI said.

NEITI said its major concern was that now that the PSCs account for about 50 percent of total oil production and major source of revenues, the delay or failure to review and renew the agreement means that payment of royalty on oil production under PSCs would not be made while computation of taxes would be based on the old rates.

One striking feature of the NNPC financial operations report is the disclosure that the Corporation lost the sum of N547billion in its operation between 2015 and 2017. Out of this amount, the NNPC Corporate Headquarters recorded the highest revenue loss to the tune of N336.268billion.

On the contrary, the Report revealed that the Nigeria Gas company made a huge profit of N141.324billion.