Nigeria Loses N7.6tr To Faulty Agreements With IOCs - Minister Of Petroleum Resources, Ibe Kachikwu Says

The Minister of Petroleum Resources, Dr.   Ibe Kachikwu, yesterday stated that Nigeria lost about $21 billion (N7.6 trillion) to International Oil Companies, IOCs, operating in the country due to non-implementation of the Production Sharing Contract, PSC, Act of 1993, otherwise known as the Deep Shore Act.

Consequently, the Federal Executive Council, FEC, at the weekly meeting presided over by the Vice President, Prof. Yemi Osinbajo, at the Council Chamber, approved an amendment of the Act, especially Section 15,   by the Ministries of Petroleum, and Justice for subsequent passage by the National Assembly.

This is as the Minister of Transportation, Rotimi Amaechi, said that award of contract for railway project in the South East was predicated on when the government will secure loans, noting that the zone would not be left behind in the rail projects Briefing State House correspondents after the FEC meeting, the Minister of State for Petroleum Resources stated: 

“Once the price of crude oil exceeds $20 per barrel, the government will take steps to ensure that the premium element is then distributed at an agreed premium level for the nation so that we get more from our oil. “But over the last 20 years, nothing really was done. From 1993 till now cumulatively, we have lost $21 billion because government did not act, we did not exercise it.

In 2013, there was a notice to oil companies that we are going to do this but we didn’t go through in terms of going to Council to get approval. “So, one of the things we have done in the last one year is that we have worked very hard to get that amendment because once we do, the net effect for us is close to $2 billion extra revenue for the Federation.” On whether the problem could be immediately tackled or the monies recovered, Kachikwu said: 

“I doubt it for the simple reason that the provisions of the Joint Operating Agreement, JOA, on Section 15 is that government would need to do something, which is what we have just done today. “If it is not done, then the oil companies are operating within the realms of what the law is. So that’s going to be difficult. But I love not to talk too much about that because I will be giving out what my strategies would be on national TV.

“Let me just say that however we do it, we would definitely try to see whether a possibility exists for some claw back advantages.” The PSC of 1993 was in response to the funding problem faced by the old Joint Venture arrangement as well as the desire of the Nigerian government to open up the sector for more  foreign participation. It governs the understanding between the Nigerian National Petroleum Corporation (NNPC) and all new participants in the new inland deep & ultra deep-water acreages, by which  the contractor bears all costs of exploration and production without such cost being reimburseable if no find is made in the acreage.

It also provides that cost is recoverable with crude oil in the event of commercial find, with provisions mad7ue for tax oil, cost oil and profit oil after which the balance after deduction of Tax Oil and Cost Oil is to be shared between the NNPC and the contractor in an agreed proportion. Meanwhile, the FEC also approved the award of contract of over $2.7 billion to three consortium that will finish up the AKK (Abuja, Kaduna, Kano) gas pipeline, to ease movement of gas from the southern corridor to the North for power generation. Kachikwu said: 

“We currently have trapped power, trapped gas all in the southern corridors that is going nowhere because of lack infrastructure. “So that has now been awarded. You remember that was partially done, this is a contract that has lasted over 13 years, so we got approval for that today and so that is going forward very nicely. All I can tell you is that they will be available on the completion of the construction of the rail tracks and we aiming to complete construction 2018 December. It is a big risk that I am taking by insisting it must be completed by 2018 December. I have said it to the public, the contract is actually for three years but we think they should complete it in 2018 December. “Reason, in China,   they do a thousand kilometers per a year, so why can’t they do one hundred and eighty something kilometers in one year, six months or one year six months in Nigeria.

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