Senate Probes $60bn Loss in 24-year-old Oil Deal

• Senate Probes $60bn Loss in 24-year-old Oil Deal

The Senate has begun investigation into the alleged loss of about $60bn to the non-enforcement of the terms of Production Sharing Contracts signed between the Federal Government, through the Nigerian National Petroleum Corporation, and International Oil Companies in 1993.

This followed the adoption of a motion entitled, ‘Need to Enforce the Terms of 1993 PSC Agreement between the lOCs and the Federal Government’, and moved by Senator Donald Alasoadura and co-sponsored by Senators Ahmadu Abubakar, Baba Kaka Bashir Garbai and Ali Wakili.

The upper chamber of the National Assembly mandated the Committee on Petroleum Resources (Upstream) to “investigate the implementation of Production Sharing Contract agreements of 1993 and determine the extent of revenue losses, and proffer lasting solutions to the problems of implementing the agreement.”

The lawmakers also urge all those charged with the statutory responsibility of reviewing the contract to immediately do so to reflect the current economic realities.

The motion, which was presented by Abubakar, read, “The Senate notes with shock that Nigeria lost close to $60bn to the non-enforcement of the terms of the PSCs signed between the Federal Government and the IOCs in 1993 through the NNPC.

“The Senate notes further that the 1993 PSCs provide that royalties paid by the IOCs on oil blocks located in deep water should be reviewed upward when crude oil price exceeds $20 per barrel.”

It added, “The Senate is concerned that these provisions were later backed by the Deep Offshore and Inland Basin Production Sharing Contracts Act (No. 09) of 1999. Significantly, Section 16 (1 and 2) of the Act provides that if the price of crude oil at any time exceeds $20 per barrel, the share of government shall be renegotiated to such extent that the production sharing contracts shall be economically beneficial to the government of the federation.

“The Senate is aware that in addition, the decree is subject to review after a period of 15 years from the date of its commencement (January 1, 1993) and every five years thereafter.

“The Senate is worried that oil price crossed the $20 mark (in real time) in May 2004, yet the royalties were not reviewed upward as provided by the terms and conditions of the PSCs (15 years from 1993), as provided by the terms of the contract, leading to monumental loss of revenue to the federation.”

The lawmakers explained that the PSC also provided for fiscal terms that were different from the Petroleum Profit Tax Act, noting that the tax rate for the PSCs was 50 per cent, compared to 65.75 per cent and 85 per cent rates in the PPTA.

They also noted that the PSCs also provided for the investment tax credit of 50 per cent against the rate of between five per cent and 20 per cent provided in the PPTA.

Seconding the motion, Senator Yahaya Abdullahi said serious issues had been raised on the deal “because it affects the revenue of the government and the failure of a party in the agreement.”

According to him, the non-compliance with the terms of the agreement has resulted in the colossal losses incurred by the government.

Abdullahi said, “This is not the only area; there are so many areas where either through the failure of the Executive arm of government or those who have been saddled with the responsibility of protecting the interest of Nigerians, there have been so many kinds of these instances where things have been codified in the law of the federation and the Acts of the National Assembly, but those who are saddled with the responsibility of implementing those laws are not doing true to the laws.”