Chineme Okafor in Abuja
The Nigeria Extractive Industries Transparency Initiative (NEITI) has said that Nigeria is losing a lot of oil revenue from its continuous use of the deep offshore and inland basin production sharing agreement it signed with oil companies operating in the country.
It called for an urgent review of the agreements it said was obsolete, without further delay, adding that the country was losing revenue by the use of the old agreement.
In a statement by its Director of Communications, Dr. Orji Ogbonnaya Orji, which was sent to THISDAY on Sunday in Abuja, the NEITI recalled that the deep offshore and inland basin Production Sharing Contracts Act of 1993 provided for a review of the terms when prices of oil crossed $20 in real term, as well as a review of the terms 15 years after operation of the agreement and five years subsequently.
It however observed that Nigeria was yet to adhere to the provisions of the terms even now that the price of oil is revolving around $70 per barrel.
It equally explained that its Occasional Paper on three years of the Nigerian National Petroleum Corporation (NNPC)’s financial and operations reports indicated that crude oil production under the Production Sharing Contracts (PSCs) has since overtaken production under the Joint Venture (JV) arrangements.
According to it, PSCs accounted for 44.8 per cent of total oil production within the reviewed period, while JV contributed 31.35 per cent.
It explained that in 1998, JV operations accounted for over 97 per cent of oil production while PSCs contributed only 0.50 per cent. The trend it noted continued until 2012 when PSCs accounted for 37.58 per cent while JVs contributed 36.91 per cent.
“In 2013, PSCs contributed 39.22 per cent while JVs contributed 36.65 per cent; 2014 – PSCs – 40.10 per cent and JVs, 32.10 per cent; 2015 – PSCs – 41.45 per cent and JVs, 31.99 per cent; while in 2017 the contributions stood at 44.32 per cent and 30.85 per cent respectively.
“NEITI’s major concern is that now that the PSCs account for about 50 per cent of total oil production and major source of revenues, the delay or failure to review and renew the agreement means that payment of royalty on oil production under PSCs would not be made while computation of taxes would be based on the old rates,†said the statement.
It also said on lifting of crude oil, that the NNPC report showed that international oil companies (IOCs) lifted more crude oil than the government.
“Total lifting of crude oil and condensates was 2.135 billion barrels. Of this sum, IOCs and Independents lifted a total of 1.367 billion barrels, while government’s lifting by NNPC was 721.16 million barrels.
“This means that the operators lifted 64.01 per cent of total crude lifting’s, while government through NNPC lifted 33.76 per cent. When expressed in monetary terms, total government lifting of oil amounted to $35.893 billion while the figure for IOCs and Independents was $68.591 billion,†said NEITI.
According to it, one striking feature of the NNPC financial operations report was the disclosure that the NNPC lost the sum of N547 billion in its operation between 2015 and 2017.
“Out of this amount, the NNPC corporate headquarters recorded the highest revenue loss to the tune of N336.268 billion,†it explained, adding that the Nigeria Gas Company (NGC) on the contrary made a huge profit of N141.324 billion within the period.
It applauded the NNPC for the monthly voluntary disclosures, but said its auditors under the EITI framework have not independently verified the information and data from the reports.
“NEITI has not, except for the year 2015, independently validated the data from NNPC. This will be done in ongoing and future reconciliation reports. What has been done here is a preliminary analysis of the data that NNPC has made available for the three-year period.
“The figures examined here do not represent the sum total of all revenues from the sector, as other payment streams like royalties and taxes from JVs, signature bonuses, transportation rental fees, NESS fees, penalties and others are not covered by the NNPC financial and operational reports,†it explained.
