Averting Crisis in Oil, Gas Industry

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Davidson Iriekpen calls for the intervention of stakeholders in resolving the dispute between the Petroleum and Natural Gas Senior Staff Association of Nigeria, the Nigeria Union of Petroleum and Natural Gas Workers, General Electric and ARCO Group, over the non-payment of outstanding entitlements before it snowballs into a full blown crisis

All is currently not well between the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG), General Electric International Operations Nigeria (GEION) and ARCO Group Plc, over the non-payment of entitlements to members of the unions. Last month, the two oil workers’ unions issued a 14-day ultimatum to industry stakeholders including the Minister of State for Petroleum, Nigerian National Petroleum Corporation (NNPC) and others to call GEION to order over the non-payment of terminal benefits and allowances to their members, who were laid off by Arco Group Plc in August 2016.

In a joint letter due to expire any moment from now, the unions threatened that failure to intervene in the dispute would leave them with no other option than go on a nationwide sympathy strike which would paralyse activities in the country.

In the letter addressed to the concerned officers and signed by the General Secretary of PENGASSAN, Lumumba Okugbawa, and General Secretary of NUPENG, Olawale Afolabi, they stated that it was obvious that the intervention of the Federal Ministry of Labour and Employment, which agreed that ARCO, Federal Inland Revenue Service (FIRS) and GEION should meet and reconcile the figures on the excess Withholding Tax (WHT) as alleged by ARCO was not going anywhere.

“The patience of our members is at the breaking point as they see their colleagues from ARCO wallowing in deprivation and hardship after toiling for several years due to deliberate ploy od some individuals and organisations to elope with the fruits of the labour.

“We, therefore, call on relevant authorities to compel GEION and any other concerned parties in this matter to do the needful for our members to get their final entitlements without further delay; failure of which the unions would be left with no other option but to go on sympathy industrial action nationwide for the entitlement of the workers to be paid,’’ the statement said.

Giving the genesis of the dispute PENGASSAN said ARCO provided services to GEION on Global Maintenance Services Contracts for the Nigerian Agip Oil Company (NAOC) Gas Turbines from 2006 to 2015. It added that ARCO’s payments for the services were routed through GEION, which had a corresponding duty under the Nigerian tax laws to deduct WHT from payments due to ARCO and remit same directly to the federal government through the FIRS.

It said the approved statutory deduction rate ought to be five per cent, but GEION applied a rate of 10 per cent to ARCO’s invoices. According to the oil workers’ union, ARCO protested this but GEION claimed that the statutory rate was 10 per cent and that the monies so deducted had been duly remitted to the FIRS.

“However, ARCO noticed that the value of the WHT credit notes issued by FIRS to ARCO, as evidence of receipts of the WHT deductions remitted by GEION did not match the amount that were deducted from their invoices. ARCO raised the issue again with GEION and both parties agreed that clarification should be sought from the FIRS on the appropriate and applicable WHT.

“The FIRS responded that the statutory rate is five per cent. GEION contested the position through their tax consultants, the PriceWaterHouseCoopers (PWC) and the FIRS reconfirmed its earlier position, adding that GEION remitted only five per cent and not 10 per cent as claimed by GEION.

The FIRS further directed GEION via a letter dated January 14, 2019 to remit the outstanding five per cent or provide evidence of payment within 10 days from the receipt of that letter. Unfortunately, GEION has refused to act further to pay what they unlawfully deducted and withheld from ARCO over the nine-year period.

“The association finds it criminal that in the face of overwhelming documentary evidence establishing Arco’s claim of alleged payment to the refunds demanded, GEION would still make unsubstantiated claim of alleged payments and remittances to the Federal Inland Revenue Service (FIRS), which are not backed by WHT credit notes, payments advices, receipts, bank statements or any other credible evidence,” it said.

Investigation by THISDAY revealed that the letter by the workers’ unions was not the first time attention would be drawn to the dispute between GEION and ARCO. It was gathered that between 2015 and 2017, the two companies were severally brought before the Federal Ministry of Labour and Employment over the issues of non-payment of accrued staff gratuity, redundancy benefits and overhaul allowances due to ARCO workers who were engaged on the NAOC OBOB contract.

Checks revealed that ARCO explained to the minister during those mediation meetings that it was unable to settle the outstanding obligations because GEION, who was the main contractor, had refused to pay it monies that were then due and outstanding, such as the balance of the demobilisation fee and the workers’ overhaul claims.
After several meetings brokered by the ministry, GEION and ARCO had reached an agreement for the closing out of the contract and payment of the fee subject to two very important issues which are the receipt by ARCO from GEION, of all outstanding WHT credit receipts due to ARCO for services rendered on the contract, and the resolution of the overhaul payment claim.

By law, WHT was to be deducted from ARCO invoices at the rate of five per cent of the value of each invoice. However, GEION had been deducting WHT at the rate of 10 per cent, in spite of ARCO protests. The attempt to resolve this issue gained traction when it wrote to demand a refund of overpayments it claimed it had made to the FIRS on certain ARCO invoices it deducted WHT from, at the rate of five per cent instead of 10 per cent.

The long-standing disagreement over what rate was applicable led to an agreement that the FIRS should be contacted for clarification. GEION stated that it would accept and abide by any clarification or ruling by the FIRS provided same was issued from the revenue service’s headquarters in Abuja.

ARCO wrote to FIRS to request the clarification and FIRS responded that the applicable WHT rate was five per cent and not 10 per cent. Upon receipt of the FIRS confirmation, ARCO wrote a letter dated November 6, 2017 to GEION requesting a refund of the excess deductions from its invoices arising from the wrongful application of 10 per cent withholding tax rate as against the statutory rate of five per cent.

Rather than refund the money as requested, GEION acting through its tax consultant, PriceWaterHouseCoopers, wrote another letter to the FIRS requesting a re-confirmation of the FIRS position conveyed vide the said FIRS letter dated November 2, 2017, and further asking how the excess withholding taxes deducted from the claimant should be treated, in the event that the FIRS maintained its position that the applicable WHT rate was five per cent.
By another letter dated July 26, 2018 the Executive Chairman of the FIRS had responded to GEION’s request and affirmed the statutory WHT rate deductible from the ARCO invoices as five per cent.

More importantly, the Executive Chairman of the FIRS directed GEION to make available to ARCO, all outstanding WHT credit notes issued in respect of all remittances of WHT made on ARCO’s behalf.
The implication of the FIRS clarification was that GEION had over the years been unduly deducting an additional five per cent over and beyond the statutory five per cent on ARCO invoices except for the few invoices mentioned in its letter.

In a recent letter to GEION, the Ministry of Labour and Employment had directed it to honour the agreement to ensure industrial harmony. The letter which was signed by the Permanent Secretary, Federal Ministry of Labour and Employment, William Alo, said its reconciliatory meeting with relevant parties on the dispute had earlier drawn up conclusions which all parties were advised to honour.

Alo, said following the dispute, the ministry on September 24, 2019, had brokered a conciliatory meeting with relevant parties, while also extending invitation to the FIRS.
The conclusions reached, according to documents seen by THISDAY, stated that GEION should apply to FIRS and request for the refund of the over-deducted sums paid to FIRS as agreed during the reconciliation meeting; that both GEION and ARCO should go back and within two weeks, reconcile the deductions.

It also showed that all tax deductions made by GEION on behalf of ARCO substantiated with documentary evidence, with the objective of remitting to FIRS, but which were not remitted to FIRS, should be refunded to ARCO within three days.

After the meeting with the ministry, rather than comply, GEION in a dated October 9, 2019 addressed to the Executive Chairman of the FIRS, had again asked the revenue service to review its records for details of the WHT remittances it made on behalf of ARCO from 2006 to 2008 in naira and dollars in order to enable it close the outstanding balances. It said it did not have information for the years, and was relying on the FIRS to provide it with the details of the taxes it remitted for the period.

“As earlier communicated, we do not have information for those years, and we are relying on the FIRS to provide us with the details of the taxes we remitted for the above period,” GEION said.
The FIRS on its part, wrote a letter to GEION dated October 17, 2019 wherein it requested it to respect agreement reached with the Federal Ministry of Labour and Employment.

The letter signed by Dick Irri read: “I draw your attention to your commitment at the held at the Federal Ministry of Labour and Employment wherein you agreed to make request for refund on behalf of ARCO Group. The agreements are clearly summmarsied in the letter by the ministry.

“You are therefore requested to immediately respect your commitment by requesting for refund on behalf of ARCO considering the fact that the time agreed has lapsed.”

But ARCO feels that GEION is using tricks to retain its monies which were illegally deducted, using FIRS as a cover. In letter dated November 7, 2019, addressed to the FIRS Chairman, it said the multinational has settled for a strategy of delay, deflect, conflate and confuse tactics in order not to pay the money it has been owing it.
It wondered why GEION would make a payment of N130,387 million to the FIRS in January 2019, when on September 18, 2019, it informed a meeting of PENGASSAN/NUPENG executives that all WHT payments had been made to FIRS and that it was the revenue service that was not doing its work effectively.

In resolving the dispute, observers believe that stakeholders in the oil and gas industry must ensure that GEION is made to do the needful not only in the interest of the sector but the long-suffering workers who need their entitlements for their betterment.

The two labour unions in the oil and gas sector, NUPENG and PENGASSAN, have petitioned the Minister of State for Petroleum Resources, Timipreye Sylva, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari and the Director General of the Department of State Services (DSS), Yusuf Magaji Bichi, over the non-payment of terminal benefits and allowances due to the lingering dispute between General Electric International Operation Nigeria (GEION) and ARCO Group Plc.

In a joint letter addressed to the concerned officers and signed by the General Secretary of PENGASSAN, Lumumba Okugbawa, and General Secretary of NUPENG, Olawale Afolabi, the two unions called for the intervention of the minister, NNPC and DSS before the matter snowballs into an industrial crisis.
They added that ARCO said its inability to fulfill its obligations to the workers was because of the excess withholding tax deduction made from Arco by GEION.

The unions noted that during the intervention of the Federal Ministry of Labour and Employment, it was agreed that ARCO, Federal Inland Revenue Service (FIRS) and GEION should meet and reconcile the figures on the excess withholding tax as alleged by ARCO.

They added that GEION and ARCO should conclude the reconciliation in two weeks so the workers could be paid.
The agreement also stated that the sum confirmed by the Lagos State Inland Revenue Service (LIRS) office as having been remitted by GEION, but which is under dispute should be reconciled between GEION and FIRS within two weeks to pave way for further action.

The unions, however, said GEION had not taken the specific steps agreed at the meeting to facilitate the process for ARCO to pay the workers their final entitlements.
They threatened that failure to intervene would leave their members with no other option than go on a nationwide sympathy strike which would paralyse activities in the country.

“The patience of our members is at the breaking point as they see their colleagues from ARCO wallowing in deprivation and hardship after toiling for several years due to deliberate ploy od some individuals and organisations to elope with the fruits of the labour.

“We, therefore, call on relevant authorities to compel GEION and any other concerned parties in this matter to do the needful for our members to get their final entitlements without further delay; failure of which the unions would be left with no other option but to go on sympathy industrial action nationwide for the entitlement of the workers to be paid,’’ the statement said.