OrderPaperToday – The Senate today mandated its Committees on Petroleum Resources (Upstream), Judiciary, and Finance to “find out the reason for the failure to review of the Production Sharing Contract (PSC) Act” since its inception in 1993 which has reportedly cost the country $21 billion.
Section 16 of the PSC Act provides that where the price of crude oil exceeds US$20 per barrel, the Act will be reviewed to ensure that the share of the Federal Government of Nigeria (FGN) in the additional revenue is adjusted to the extent that the PSCs shall be economically beneficial to the FGN and that in any event, the PSC Act may be reviewed after 15 years from its commencement in 1993 and every 5 years thereafter.
However, since the Act became effective 26 years ago, it has not been reviewed despite oil prices rising far above the $20 per barrel leading to a revenue loss of $21 billion.
This matter was brought to the floor of the senate on Wednesday by Senator Ifeanyi Ubah (YPP, Anambra) via a motion.
Despite resolving to investigate why the Act has not been reviewed, the Senate President, Ahmed Lawan; Senate Leader, Abdullahi Yahaya; former Deputy Senate President, Ike Ekweremadu; and Senator Ifeanyi Ubah all admitted that the Senate and the National assembly was culpable in the matter and failed in its responsibilities as it is the duty of the Parliament to review the PSC Act.
While stressing that it is better late than never, the Senate President promised that a bill to amend the PSC Act will be presented for second reading tomorrow, Thursday, 3rd October, 2019.
“It is not the business of the International Oil Companies (IOCs) to remind us that we need to review the Act. Of course the National Assembly should have done a lot of work on this but is better late than never and we will do our part starting tomorrow,” Lawan submitted.
Immediate past Deputy Senate President, Ike Ekweremadu added that: “of course, we have all admitted that it was our fault that the regime was not reviewed, there is nothing we can do about that”.
Senator Ifeanyi Ubah’s motion on the matter was titled: “Urgent need to review and recover additional revenue accruable to the government of the Federation from the Production Sharing Contracts pursuant to Section 16 of the Deep Offshore and Inland Basin Production”.
Speaking on his motion, the Anambra Senator explained that the Production Sharing Contract (PSC) is a contractual arrangement for petroleum exploration and production whereby the state as owner of the petroleum resources engages a contractor to provide technical and financial services for exploration and production operations for an agreed share in profit oil after payments of royalty, cost and tax oil.
He stated further that this contractual arrangement were offered by the Federal Government of Nigeria in the 1991 licensing round and its terms was codified into a legislation namely, the Deep Offshore and Inland Basin Production Sharing Contract Act Cap D3 LPN 2004 (PSC Act) which became effective on January 1, 1993.
Ubah revealed that Nigeria presently has seven fields from the 1993 PSCs which are currently in production, namely: Abo (OML 125) operated by EN]; ‘ Agbami-Ekoli (OML 127 and OML 128) operated by Chevron; Akpo and Egina (OML 130) operated by Total and South Atlantic Petroleum; Bonga (OML 118) operated by Shell; Erha (OML 133) operated by ExxonMobil; Okwori and N da (OML 126) operated by Addax; and Usan (OML 138) operated by ExxonMobil.
“No review of the Act was undertaken on the anniversary-induced datelines, specifically when crude oil price exceeded US$20 in 2004 or at the 15th year anniversary of the PSC Contract, specifically on the 1st day of January 2008. Also, at every 5th anniversary post the 15th year anniversary of the Production Sharing Contract which are the 1st day of January, 2013 and the 1st day of January, 2018.
“Several unsuccessful efforts have been made in the past to review or amend the PSC Act through private members and government sponsored bills in the 8th and other preceding sessions of this National Assembly,” he said.
Ubah continued: “As a result of the non-review and amendment of the PSC Act, the Federal Government has lost about US$21 billion (about N7trillion) over a period of 20 years due to the failure to review and amend the PSC Act as stated by the Honourable Minister of State for Petroleum Resources following the meeting of the Federal Executive Council on the 14th day of December, 2017.
“Nigeria, having lost trillions of naira due to non-review of the PSC Act, stands to gain an additional sum above 30billion naira monthly (360billion annually) if the Act is reviewed and amended which would boost our revenue base significantly.
“The principal role of the National Assembly is to make or amend subsisting laws of the Federation of Nigeria, which power is derived from the provisions of section 4 of the Constitution of the Federal Republic of Nigeria 1999 (as amended) and exercised through the passing of bills as provided in section 58 of the same constitution.”
Many Senators who spoke on the matter lamented how the country had been short-changed for many years and called for an urgent review of the Act.
The Senate additionally directed its Committees on Petroleum Resources (Upstream), Judiciary, and Finance “to identify the best fiscal regime for the PSCs and review the provisions of the PSC Act to ensure that beyond the crude oil price of US$20, the share of the Federal Government of Nigeria in the additional revenue is adjusted in accordance with the provisions of the amended Act”.