The non passage of the Petroleum Industry Bill (PIB) has been identified as the sole reason delaying the review of the Production Sharing Contracts (PSCs) with oil companies, Managing partner, J.O Adidi and Co., John Adidi, has said.
The Nigeria Extractive Industries Transparency Initiative (NEITI), in a recent study, revealed that Nigeria had lost no less than $16 billion, over a 10-year period (2008–2017), due to non-review of the 1993 production sharing contracts (PSCs) with oil companies.
The PSC was introduced in 1993 to address some of the issues faced by the Joint Operating Agreement (JOA) and to provide a suitable agreement structure to encourage foreign investment in offshore acreage. Under the PSCs, the NNPC is the holder of the business while the international oil company (IOC) is the contractor. In 1993 the NNPC entered into PSCs with eight IOCs and Nigeria is believed to have attracted much needed additional foreign investment.
According to NEITI, between 1998 and 2005, total production from PSC assets was below 100,000,000 barrels per year, while Joint Venture (JV) companies produced over 650,000,000 barrels per year. By 2017, total production by PSC companies was 305,800,000 barrels, which was 44.32 per cent of total production. Total production by JV companies was 212,850,000 barrels, representing 30.84per cent of total production.
The development, according to NEITI, therefore, calls for an urgent review of the PSCs to stop the huge revenue losses to Nigeria.
NEITI added that such a review was important for the country because oil production from PSCs has surpassed production from JVs as productions from PSCs contribute the largest share to the nation’s income.
Adidi, who described it as part of the regulatory issues that have been pending, said provisions in the law had prescribed that if crude oil price rises above a certain level the production sharing contracts is supposed to be revisited
He told The Nation on telephone that Nigeria was supposed to get more revenue when the oil price goes up, adding that oil price had never gone below $20. He expressed concern that oil price had always gone up in the past years and Nigeria had not taken advantage of that.
He recalled when the Petroleum Industry Governance Bill (PIGB) came up everybody expressed excitement because it was a compilation of laws that would take care of the PSCs and similar issues, but unfortunately the PIGB up till now is still in the works. “So, the plan was to have a collection of laws for the whole industry through the PIB, but nobody envisaged that the bill by now would not have been approved,” he added.
According to him, if the PIGB had been approved every issue concerning the PSCs would have been settled. “Unfortunately, we are approaching the 9th Assembly. The 8th Assembly was unable to pass the PIB and they are coming to the end of their tenure by May. There’s no way the bill can be passed in the next two months.
“We have to be realistic, what the 8th Assembly could not do in three years and 10months they will not be able to achieve in two months.
“So, what it means is that the 9th Assembly will start all over again because there will be new members, who don’t know what the PIB is even all about, they need to be educated, and they need to follow the process.
“It’s unfortunate that we don’t tackle some of these issues speedily as a nation and since oil still remains the mainstay of the nation. It’s even a shock that those in authority are not patriotic enough to do this in the national interest. It will continue to affect us, we are the ones losing,” he noted.
Adidi said the multinational oil companies would not tell Nigeria to review the agreement when they know they will pay more. “It’s our duty as a nation to revisit the contract and bring out issues that needed to be reviewed and approach our partners to review the clauses in the PSCs and the country will benefit,” he said.
It would be recalled that the PIGB that was passed, but the president disagreed with some provisions in the bill and it has remained unsigned.
The nineth Assembly, Adidi explained, would have to start from square one, noting that it will be inaugurated sometime in June after the President’s swearing in.
“I don’t see the nineth Assembly taking position to be able to visit the PIGB until may be around August, at the earliest. Also, as we speak, the budget of 2019 has not been approved. To me, that should be the main thrust of the remaining period of the eighth Assembly. Let them do everything possible to approve the budget. From the fillers we are getting they are not even thinking of approving the budget, their session may even end without approving the 2019 budget. Recall, the 2018 budget was approved in June, ‘so if it’s going to be approved in June that means the tenure of the 8th Assembly would have been over,” he said.
According to Adidi, this is one major reason foreign investors are scared away. “The level of uncertainty was so high and there are markets where there are certainties, the rules are there and you can project into the future,” he said.
National Assembly Petroleum Upstream Committee Vice Chairman, Senator Gershom Bassey, who also spoke on telephone, agreed that the oil price benchmark had exceeded $20 several times in the past years, but unfortunately nobody has reviewed it. He said the issue was brought on the floor of the House and there was a committee looking into it, adding that some of these things were covered in the upcoming petroleum industry fiscal bill despite the problems and delays in the whole PIB.