Adedayo Akinwale ín Abuja
House of Representatives has urged the federal government to review the contract terms in the Production Sharing Contract (PSC) with a view to accommodating gas terms such as: gas development agreements, cost recovery, profit sharing, among others.
The House also mandated its Committee on Gas to effect amendment of the PSC Act with a view to accommodating these gas terms accordingly.
The House decision followed the adoption of a motion yesterday moved by Hon. Kolawole Lawal at plenary.
He explained that the PSCs for offshore blocks were designed for oil and as a result, the terms for gas in it are either vague or non-existent and were never addressed by the Nigerian Gas Master Plan (NGMP).
The lawmaker said considering the fact that gas is set to take over the petroleum industry because of the quest for alternative energy sources, hence, the neglect of income from gas only spells doom for the economy as there’s no check on the fraudulent activities of operators.
Lawal noted that the first gas supply from Bonga Field, known as OML 118, was carried out by Shell Production Distribution Company (SPDC) and was delivered via Offshore Gas Gathering System (OGGS) owned by Shell Nigeria Exploration and Production Company Limited (SNEPCO) to train three of Nigerian Liquefied Natural Gas (NLNG).
The lawmaker noted that SNEPCO and SPDC operate as separate organisations with separate managements, thus, while SNEPCO runs the PSC operations, SPDC runs the Joint Venture operations of Shell in Nigeria.
Lawal, however, expressed worry about reports on OML 118 where the revenues for gas resources are not remitted as a result of the clear lack of gas clauses in the PSC governing Oil Prospecting Licence (OPL).
He added that Bonga Field (OML 118) is owned by the Nigerian National Petroleum Corporation (NNPC), while the contracting parties are SNEPCO with 55 per cent, ExxonMobil with 20 per cent, NAE (Agip exploration) with 12.5 per cent and Total with 12.5 per cent, thus considering the ownership structure, contracting parties do not own the oil bloc as against Joint Ventures (JVs), hence SNEPCO is a contractor to NNPC on OML 118 and not in any way an owner or concessionaire.
Lawal said the operators of Bonga Field started to sell the gas to NLNG without agreeing to prior terms, resulting in the contractor’s claim of ownership of the gas, which is obviously a breach of the PSC structure.
He recalled that in December 2005, the NNPC, as the concessionaire, wrote to SNEPCO over the associated gas of the Bonga Oil fields reiterating that Nigeria is the rightful owner of the gas being sold.
Lawal recalled that in 2015, the Department of Petroleum Resources (DPR) wrote to the NNPC informing them that as concessionaires, NNPC ought to pay royalties on the Bonga field’s gas.
This, he said, forced NNPC to inform the contracting parties of the directives from the DPR and shortly after, the Nigerian Agip Oil Company (NAOC) paid taxes on the Bonga Field to Federal Inland Revenue Service (FIRS), prompting the NNPC to demand for the parameters for calculating the tax.
Lawal noted that the demand by the NNPC led to the demand from the other parties to the PSC contracts to account for their own tax liabilities and to remit same to the Federal Inland Revenue Service (FIRS).
He expressed concern that this situation whereby the regulator is asking questions on how to calculate royalties was absurd and a result of the absence of gas clauses in the PSCs or the appropriate laws for gas, which is showing lack of transparency in operations of the PSCs, encouraging corrupt acts in the industry and defrauding the federal government.
He said: “An estimated 60 trillion cubic feet (tcf) of gas is located in the offshore gas blocks covered by PSCs and they are either flared or capped as at today.
“Cognizant that gas terms for offshore PSC blocks will help unlock more trillion cubic feet of gas for Nigeria’s domestic gas market and it is of utmost importance that the irregularities are remedied with immediate effect.”
The House therefore mandated “the Committee on Gas to liaise with all the contracting parties to the PSC, the DPR, NNPC & all other relevant stakeholders to determine the current situation in the gas sector and create ways to attract investments and set out terms that will grow the economy with special reference to a legal backing to the pricing mechanism.”
