The House of Representatives ad hoc Committee investigating alleged loss of $21 billion by Nigeria to expired agreements on Production Sharing Contracts (PSCs) with the international oil companies (IOCs) has blamed the Department of Petroleum Resources (DPR) for failing to renegotiate the terms of the contracts when they were due as provided in the agreements.
The committee has also resolved to write the embassies and high commissions of the home countries of the affected IOCs to help the federal government to recover its lost revenue.
The Deep Offshore and Inland Basin PSC Act had provided that the terms of the contracts should be renegotiated when crude oil price reached $20 per barrel to enable Nigeria collect higher royalties from the IOCs.
But the federal government failed to activate the relevant clause in the PSC Act when oil price reached $20 per barrel, leading to the estimated loss of $21 billion by the country.
At an interactive session with stakeholders which included relevant government agencies and IOCs in Abuja Thursday, the committee argued that it was the responsibility of the DPR to regulate the country’s oil sector, and hence should have triggered the terms in the PSC Act which stipulated that calculation of royalties due to the federal government should be reviewed upwards once the price of oil reached $20 per barrel or after 10 years of the Act in practice.
Speaking to reporters at the meeting, the Chairman of the committee, Hon. Daniel Reyenieju, explained that the failure by the federal government to activate the clause was the fault of the DPR.
Reyenieju noted that if the DPR were sensitive to its regulatory functions, it would have activated the relevant clause and save the country from losing such huge amount of money.
“The DPR will be held responsible for the PSCs delay. No, I’m not impressed but that is a process, we are just building up and will get to a status where we will mandate all of them,” said Reyenieju, who took time to ask questions the government agencies either parried or provided inadequate answers to.
“We are a parliament and one of our responsibilities is to oversight, and oversight government spending and incomes. What actually triggered it is the need for parliament to continue to oversight the government and all agencies that generate revenue for government.
“One of our members spotted that there is a particular section in the PSC Act of 1993 and 2003, and that the Act has outlived its usefulness, specifically Section 16 (1) of the Act which states that the moment the price of crude oil exceeds $20 per barrel, it be renegotiated so that government can have a higher take in terms of revenue but for 20 years, nobody, not even the enforcers of the Act which is the DPR, not the NNPC, or the ministry of justice has talked about it. Even the IOCs are also liable because it is a mutual business.”
The Minister of State for Petroleum, Dr. Ibe Kachikwu, had stated that Nigeria lost a whopping $21 billion to its failure to implement the premium element governing the PSCs as provided under the Act.
He had also added that the government has initiated moves to amend the Act which was enacted in 1993 to provide the fiscal framework for foreign investments in deep offshore and inland basin acreages in the oil and gas sector.
Reyenieju acknowledged that while the country might have lost close to $21 billion on account of, the ad hoc committee would work to ensure it is recovered.
According to him, the committee will write the embassies and high commissions of the home countries of the affected IOCs in this regards.
Asked what impacts that would make, Reyenieju said: “Most of the IOCs are funded greatly by various international companies that are represented by their embassies here in Nigeria and if we are talking about $21 billion, and they are not even responding to queries and invitations, then we must get back to their home countries and this is the point we are going to.”
At the session, the DPR stated in a presentation it made on the royalty earnings due to the government between 2003 and 2017 for oil produced and sold beyond $20 per barrel was $6,055,077,636.48.
It however, refused to take responsibility for not activating the clause, but rather inferred that it was the Nigerian National Petroleum Corporation (NNPC) that should, a claim the committee rejected.
The representatives of the ministry of finance told the committee that they were not aware of Section 16(1) of the Act which made provisions for the clause.
The ministry said it relied on the revenue remitted to the Federation Account in collaboration with other parties.
On its part, the FIRS said it wrote to the National Assembly on the issue but could not act further because it was rather a royalty affair, which fell within the purview of the DPR.
