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HEDA asks petroleum ministry to amend deep offshore Act

The Human and Environmental Development Agenda (HEDA), a non-governmental organisation, has requested for an “immediate” amendment of the Deep Offshore and Inland Basin Production Sharing Contracts (PSC) Act.

The Deep Offshore and Inland Basins PSC Act was enacted in 1993 to provide the fiscal framework for foreign investments in deep offshore and inland basin acreages in the oil and gas sector.

The PSCs were last reviewed in 2008.

In a Freedom of Information (FOI) request sent to the ministry of petroleum resources and signed by Olanrewaju Suraju, the HEDA’s chairman, the group said the terms of the PSCs between the federal government and the oil companies should be reviewed particularly as it relates to the payment of royalties.

HEDA said the FOI request is premised on the recent observations by petroleum sector analysts and lawyers on the economic losses being incurred by the country on the basis of the current arrangement.

The group asked the ministry to make public, “relevant details of the international oil companies, their deep offshore operations concerned, the quantity of oil involved and amount owed”.

“We thus lend our voice to the calls for the repeal of the provision of the PSCs, which stipulates that royalty on crude oil production in water depths exceeding 1,000 metres is zero over a particular period of time,” the FOI request read.

“The Federal Government had in 1993, awarded some oil blocks in the deep water to the IOCs under PSCs, which provided that royalties to be paid by the IOCs would depend on the depth of the water where oil is found.

“By virtue of Section 5 of the Act, the payment of royalty in respect of the Deep Offshore production sharing contracts shall range from 4 to 12 per cent while no royalty shall be paid whatsoever in areas in excess of 1000 metres depth.

“According to reports since a large quantity of the oil and gas produced by Nigeria is located beyond 1000 metres depth, the multinational oil companies have taken advantage of the Act to avoid the payment of royalties to the Federation Account.

“It is on the basis of the aforementioned facts that we are making a demand for immediate enforcement of the contract with the oil companies caught in the violation of the Act by ensuring due royalties are paid with interest and penalties.

“We further demand immediate commencement of process for the amendment of relevant sections of the Deep Offshore and Inland Sharing and Production Contract Act, particularly Section 5 of the said Act.”

Ibe Kachikwu, minister of state for petroleum resources, in December 2017 said Nigeria had lost as much as $21 billion to non-review of the PSCs.

He said the federal government had initiated moves to amend section 17 of the Deep Offshore Act, in order to increase government’s revenue from crude oil sales when prices exceed $20 a barrel.

Oluwatoyin Bayagbon :