Early last month, it came to light that Nigeria is seeking about USD 63 Bn from oil companies under regulations that allow the government to revisit revenue-sharing deals on petroleum sales if crude prices exceed USD 20.00 a barrel.
In simple terms, apparently, Nigeria had entered into a contract-law with international oil companies (IOCs) in 1993 which entitled Nigeria to a greater share of revenue when the oil price crossed the USD 20.00 per barrel mark.
In 1993, crude was selling at USD 9.50 per barrel. By the 2000s, oil prices exceeded USD 20.00 per barrel. But apparently, nothing changed as per the remittances of the oil companies to the government. And now it seems like the government has come to collect the amount allegedly owed by IOCs over the years since oil prices exceeded USD 20.00 per barrel.
Plus it’s quite a sum too — one that can fund the country’s national for up to three years, considering the 2020 budget was pegged at NGN 10 Tn.
Just recently, it became known that the federal government, through the Office of the Attorney General of the Federation and Minister of Justice, Abubakar Malami, has been talking to IOCs and exploring other legal channels to bring about the recovery of about USD 63 Bn in arrears allegedly owed by the IOCs — the amount that should have accrued to Nigeria over the years since the price of a barrel of oil crossed the USD 20.00 mark.
The USD 63 Bn debt allegedly owed the Nigerian government debt by IOCs when converted to Naira is more than NGN 20 Tn, which is more than enough for the three years budget of Nigeria considering the 2020 budget of NGN 10 Tn.
And today, Malami has again called on IOCs settle about USD 63 Bn owed the Federal Government. The minister said the money represents unpaid arrears the companies have refused to remit to the coffers of the Federal Government.
Last month, Malami told Reuters over a phone call that Nigeria had been “short-changed” under the law and was pursuing a case for recovery if it was established that the oil companies had underpaid the government.
“Computing the amount that should be credited to the Nigerian government if the law was effectively applied, that translates to around $62 billion against the IOCs (international oil companies),” said Malami.
“All options are on the table and there is no limit to what we can do in terms of engagement, in terms of settlement, if the need arises,” he added. though there was no mention of the oil companies involved in the matter.
Most of Nigeria’s crude is pumped by the five oil companies — Royal Dutch Shell Plc, ExxonMobil Corp., Chevron Corp., Total SA, and Eni SpA — which operate joint ventures and partnerships with the state-owned Nigerian National Petroleum Corporation (NNPC).
The oil companies currently take 80 percent of the profit from these deep-offshore fields, while the government receives 20 percent.
The government, however, now wants to get the oil companies to honour the long-standing contract and remit funds that have gone unremitted since the initial sharing arrangement expired. And it does seem like the matter will have its day in court.
Early this month, President Muhammadu Buhari signed the amended Deep Offshore and Inland Basin Production Sharing Contract (PSC) Bill into law.
The law will significantly increase Nigeria’s share of earnings earned from the country’s offshore oil wells. The disputed bill will see Nigeria get up to USD 1.4 Bn extra from IOCs every year.
Featured Image Courtesy: WealthResult