FG approves review of deep offshore oil production contracts

Federal Executive Council has approved review of the 1993 Petroleum Deep Offshore Act dealing with production sharing contract (PSC) as Nigeria is said to have lost about US$21 billion due to non- review of the Act in the past 27 years.
Minister of State for Petroleum Resources, Ibe Kachikwu disclosed this while briefing State House Correspondents after the weekly Federal Executive Council meeting presided over by Vice President Yemi Osinbajo.
The Ministries of Petroleum Resources and Justice are jointly mandated by FEC to work on amending Section 15 of the PSC Deep Offshore Act.
The Act had provided that once the price of crude exceeds $20 per barrel, the government will take steps to ensure that that the higher than base price is then distributed at an agreed rate, a process that will make it possible for the nation to get more revenue from the price increase.
For over 20 years, however, due to non- compliance Nigeria lost over US$21bn cumulatively, industry sources estimate.
“ln 2013, there was a notice to oil companies that we are going to do this but we did not go through in terms of going to council to get approval” Kachikwu said.
Nigeria will make over US$2 billion in extra revenue into the Federation account once the review is done, according to the Minister.
He however expressed doubt that the Act, when finally reviewed, will have a retrospective effect for the simple reason that the provisions of the Joint Operations Agreement ( JOA) on section 15 which makes it mandatory for the Nigerian government to act when oil prices increase was not activated

“Nigerian government did not 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,” Kachikwu said.

“So that is going to be difficult. But I love not to talk too much about that. I will not 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 to claw back some advantages. Let me just keep it at that.”
Kachikwu also announced that the FEC also approved the award of contract at the cost of $2.7 billion to three consortia to work on the AKK (Abuja, Kaduna, Kano) gas pipeline.
The action will increase movement of gas from the southern corridor to the north as well as increase power generation across the country by enabling utilization of gas in the hinterlands when finally completed.
“We presently have trapped power, trapped gas all in the southern corridors that is going nowhere because of lack of 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.”
Kachikwu also announced FEC approval for a contract to a consortium for the Odidi pipeline from the Warri and the Southern marshlands which will move the additional gas.
According to him, “we have been able to produce through the NDDC, about 364 million cubic meters of gas to be fed into the AKK pipeline as part of gas gathering mechanism.
“So the two taken together basically will boost gas delivery into Nigeria, gas delivery for power and begin for the first time to take very definitive steps towards the movement of Nigeria from being a crude nation into a gas environment.”

 

Tony Ailemen, Abuja