Shettima Abba-Gana, acting chairman of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), says the federal government has not reviewed crude oil production sharing contracts since 2008.
In a statement released on Thursday, Abba-Gana said the country has lost $21 billion to non-review of the contracts.
PSCs are agreements where the oil company bears the cost of exploration and then recovers its operational costs from produced oil. The remaining money, known as profit oil is shared between the government and the company.
Abba-Gana commended the federal government on the approval given to the Nigerian National Petroleum Corporation (NNPC) to enable it to undertake a review of all PSCs between it and its various partners to reflect the current realities in the industry.
“As the commission that has the constitutional responsibility of monitoring revenue accruals into and disbursement of revenue from the federation account, we have been consistently calling for the review of these contracts for the past seven years,” the statement released by Ibrahim Mohammed, the commission’s spokesman, read.
“These contracts had not been reviewed nine years after both conditions stipulated in the relevant provision of the act have lapsed.”
Ibe Kachikwu, minister of state for petroleum resources, recently announced that the government had approved steps to amend section 17 of the Deep Offshore and Inland Basin Production Sharing Contracts Act, 1999.
“It specifically provides that the 1993 PSCs should be reviewed once the price of crude oil exceeds $20 per barrel or 15 years after the contracts, which is 2008.
“To this end, the commission advised that government should take appropriate steps to ensure the review of these agreements with due diligence.”
RMAFC was established to monitor accruals into and disbursement of revenue from the federation account, review from time to time the revenue allocation formula and principles in operation to ensure conformity with changing realities.