OrderPaperToday – The Senate on Tuesday passed for third reading a bill to amend Deep Offshore and Inland Basin Production Sharing Contract (PSC) Act.

Part of the provisions of the amendment imposes a fine of N500 million and a five year jail term on defaulters of the act.

PSC is a contractual arrangement for exploration and production of petroleum resources whereby state as owner of the petroleum resources engages a contractor to undertake financial responsibilities and all the risk while providing the technical and financial services for exploration and production operations for an agreed share in profit oil after payments of royalty, cost and tax oil.

The arrangement was offered by the Federal government for the exploration and production of petroleum in the 1991 licensing round and became effective with a legislation on January 1,1993.

The fiscal incentives from the act attracts oil and gas to the Nigerian deep off shore, de-risk the Nigerian deep offshore shore which was a new vista for oil and gas companies, create environment for deployment of new deep offshore technologies, allow for rapid cost recovery and assure bankability due to prevailing low oil price.

Section 16 of the act provided that where the price of crude oil exceeds $20 per barrel, the PSC act will be reviewed to ensure that the share of the Federal Government in the additional revenue is adjusted to the extent that the PSCs shall be economically beneficial to government.

Also, the act is liable to be reviewed after 15 years from its commencement in 1993 and every give years after.

Based on the aforementioned provisions, the red chamber moved to amend the PSC act to conform with the current essence of production sharing contracts.

Following a motion moved on October 2, identifying loopholes in the act, a bill was sponsored and read the first and second time on October 3 and 8 2019 respectively and then referred to the Joint Committees on Petroleum Resources (Upstream), Gas Resources and Finance for further legislative action.

Presenting the report on Tuesday, Senator Albert Bassey who chaired the joint committee informed that one of the major highlights of the amendments on the provisions for payment of royalty requires that all licences and leases holders in the deep offshore shall pay stipulated royalties irrespective of the water depth or terrain of their operation.

“Adoption of a regime of royalty by price to ensure that royalty payable is reflexive in accordance with the changes in the price of crude oil, condensates and natural gas”, Albert added.

The amendment also includes mandatory periodic review of the PSCs every eight years.

“Another significant recommendation contained in our report is that every PSC company operating in our deep offshore shall pay appropriate royalty to government irrespective of the terrain or water depth in which they operate”, Albert said.

The chamber thereafter moved into the committee of the whole where the bill was considered clause by clause.

The bill was thereafter passed by the red chamber and will be sent to the House of Representatives for concurrence.

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