The Senate has directed its relevant committees to probe the loss of $21bIllion accruable to the Federal Government as a result of failure to amend the Production Sharing Contract (PSC) Act.
This resolution followed a motion entitled: “Urgent need to review and recover additional revenue accruable to the government of the Federation from the Production Sharing Contracts pursuant to Section 16 of the Deep Offshore and Inland Basin Production Sharing Contract Act CAP D3 LFN 2004 and amend the Extant Act.”
The motion was sponsored by Senator Ifeanyi Ubah (Anambra South) and co-sponsored by 16 other senators.
In his lead debate, Ubah urged the Senate to note that “as a result of the non-review and amendment of the PSC Act, the Federal Government has lost about US$21 billion (about N7trillion) over a period of 20 years due to the failure to review and amend the PSC Act as stated by the Honourable Minister of State for Petroleum Resources following the meeting of the Federal Executive Council on the 14th day of December, 2017.”
Ubah’s prayer which is to: “Mandate the Senate Committee on Petroleum Resources Upstream to investigate the reasons for the failure to review the salient provisions of the PSC Act, identify the best fiscal regime for the PSCs and review the provisions of the PSC Act to ensure that beyond the crude oil price of US$20, the share of the Federal Government of Nigeria (FGN) in the additional revenue is adjusted in accordance with the provisions of the Act,” was unanimously adopted when it was put to voice vote by the President of the Senate, Ahmad Lawan.
Lawan in his contribution said that the nation’s economy would gain significantly if the Act is amended.
He said, “The monies can be injected into financing the 2020 Budget. This is one important and patriotic motions we have taken so far in the Ninth Senate.
“Let me say that tomorrow (Thursday), the bill that needs to be amended is coming up for consideration for second reading, and I believe what we need to do is to give it the most expeditious consideration ever.
“We also pray the executive arm of government will give it expeditious treatment because this is one bill that if amended and signed, will give us N160 billion proposed for the 2020 budget.
“So time is of essence here, and therefore, we will do everything possible to pass it, and of course follow it up, so that the effect is seen in money available to finance the 2020 appropriation which will be presented possibly next week.”
In his lead debate, Senator Ubah, urged the Senate to note with concern that the Federal Government has lost several billions of United States dollars potentially accruable revenue due to the non-review and amendment of the salient provisions of the Deep Offshore and Inland Basin Production Sharing Contract Act (2004).
He said that Section 16 of the Act which regulates the sharing of additional
revenue between the Nigerian National Petroleum Corporation (NNPC) and the various Production Sharing Contract oil companies has not been reviewed over the years.
He noted that “Section 16 of the PSC Act provides that where the price of crude oil exceeds US$20 per barrel, the PSC Act will be reviewed to ensure that the share of the Federal Government of Nigeria (FGN) in the additional revenue is adjusted to the extent that the PSCs shall be economically beneficial to the FGN and that in any event, the PSC Act may be reviewed after 15 years from its commencement in 1993 and every 5 years thereafter.”
He insisted that the PSC Act recognized and anticipated the necessity for post execution and periodic review of the Act to ensure that government derives maximum and equitable benefits from the PSCs in the following terms:
Price-induced review of the provisions of the PSC Act – that is, a review to be undertaken whenever the price of crude oil exceeds US$20 per barrel, real terms, in order to increase revenue accruable to the Government of the Federation from the PSCs;
Review of the entire provisions of the PSC Act (including sharing-formula provisions contained in the Act) 15 years after the commencement of the Act in 1993; and
Review of the entire provisions of the PSC Act every five years thereafter.
He lamented that no review of the Act was undertaken when crude oil price exceeded US$20 in 2004 and at the 15th year anniversary of the PSC Contract.
He said that the country having “lost trillions of naira due to non-review of the PSC Act, stand to gain an additional sum above 30billion naira monthly (360billion annually) if the Act is reviewed and amended which would boost our revenue base significantly.”
He observed that the PSCs would continue to play a dominant role in terms of contribution to Nigeria oil and gas production because “relative to the production from the Joint Venture Contract arrangement, the PSC’s contribution rose from 0.50% (4,000,348 barrels) to 18.70% (193,143,992 barrels) per annum between 1998 and 2005 and its contribution has grown since the year 2006 from 18.37% (188,479,413 barrels) to over 39% (199,254,000 barrels) per annum in 2018.”
He said that the Senate is convinced of the need to investigate the reasons for the failure to review the salient provisions of the PSC Act and also identify the best fiscal regime for the PSCs.
He said that there is urgent need to review the provisions of the PSC Act “to ensure that the Federal Government and by implication the states entitled to derivation recover arrears of revenues which would have accrued to the Federal Government and the states covering the years the provisions of Section 16 of the PSC Act were not reviewed and implemented.”
Senators in their contribution, supported the motion and called for speedy review of the PSC ACT to prevent further revenue leakages.