Nigeria is seeking to recover as much as $62 billion from international oil companies, using a 2018 Supreme Court ruling the state says enables it to increase its share of income from production-sharing contracts (PSC).
The government says energy companies failed to comply with a 1993 contract-law requirement that the state receive a greater share of revenue when the oil price exceeds $20 per barrel, according to a document seen by Bloomberg, prepared by the attorney-general’s office and the Justice Ministry.
The document was verified by the ministry.
While the government hasn’t said how it will recover the money, it has said it wants to negotiate with the companies. In its battle with MTN, the fine imposed on the company was negotiated down from an initial penalty of $5.2 billion.
Under the production-sharing contract law, companies including Royal Dutch Shell Plc, ExxonMobil Corp., Chevron Corp., Total SA and Eni SpA agreed to fund the exploration and production of deep-offshore oil fields on the basis that they would share profit with the government after recovering their costs.
When the law came into effect 26 years ago, crude was selling for $9.50 per barrel. The oil companies currently take 80 percent of the profit from these deep-offshore fields, while the government receives 20 percent, according to the document. Oil traded at $59.07 a barrel on the ICE Futures Europe Exchange at 14:18 p.m. in London on Wednesday.
Most of Nigeria’s crude is pumped by the five oil companies, which operate joint ventures and partnerships with the state-owned Nigerian National Petroleum Corporation or NNPC.
Representatives of the oil companies met Justice Minister Abubakar Malami Oct. 3 in the capital, Abuja, Bloomberg reported. Malami told them that while no hostility is intended toward investors, the government will ensure all the country’s laws are respected.
DIPO OLADEHINDE
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