In line with the latest landmark judgment given by the Supreme Court on Wednesday ordering the Federal Government to immediately commence steps to recover all revenues lost to oil exploring and exploiting companies due to wrong profit sharing formula termed as the Production Sharing Contracts (PSC) since August 2003, oil and gas expert, Dr Ken Igboanugo has called for immediate review of the PSC.
In an interview, he said “Even before the delivery of the Supreme Court judgment, stakeholders including IOCs and indigenous industry players and even some government quarters have been canvassing a review of the terms and conditions of PSC”.
“The target of the review is to free the industry and provide encouraging play ground for both exploration firms and the sector in general.
Dr Igboanugo added that “With the current provisions of the regulation, the exploration companies had been at great loss as the value of investments leading to the production of oil are hardly covered when operational expenses and every other financial involvement are put on the table of assessment”.
According to him, “Section 8(1)(f) of the Production Sharing Contracts between the Federal Government and the oil companies, which makes provision for the 60 to 40 per cent sharing agreement”.
“Under the Deep Offshore and Inland Basin Production Sharing Contracts Act, there ought to be an upward re-adjustment of Federal Government’s share of oil profit “in a manner as to become economically beneficial to the Federal Government” whenever the price of crude oil exceeded $20 per barrel.
“Therefore, the upheld position of the plaintiffs which is that the PSC which provides for the current sharing formula between the Federal Government and the oil companies could no longer be valid because the oil prices had since overshot the $20 per barrel is a welcome judgment,” Dr Igboanugo averred.
Business Hilights gathered that a seven-man panel of the apex court led by the Chief Justice of Nigeria, Justice Walter Onnoghen, had made the order in a consent judgment in a suit filed by three states, Rivers, Bayelsa and Akwa Ibom, against the Federal Government in 2016.
The states, through their various Attorneys General and the Federal Government, through the Attorney General of the Federation, had on April 6, 2018, filed the terms of settlement which the apex court adopted as its judgment on Wednesday.
The terms of the settlement were signed by the Attorneys General of the three states, Emmanuel Aguma (SAN) (for Rivers), Kemasuode Wogu (for Bayelsa) and Uwemedimo Nwoko (for Akwa Ibom) as well as the lead counsel for the AGF, Mr Lucius Nwosu.
The Permanent Secretary in the Federal Ministry of Justice, Mr Dayo Apata, signed as the witness.
By virtue of the agreement between the three states and the Federal Government leading to the consent judgment of the apex court, the AGF, Mr. Abubakar Malami (SAN), is to work with the three states to “immediately set up a body and the necessary mechanism for recovery” of all the lost revenue since August 2003. The mechanism is to be put in place by the AGF within 90 days, the jurists ruled.
It would be recalled that the three states which had jointly filed the suit marked SC.964/2016, in the names of their respective Attorneys General, had contended that the Federal Government had been short-changed on its supposed shares of estimated earnings of $1,149,750,000,000, under the Production Sharing Contracts for the period between 2003 and 2015.
In their presentations, they argued that the huge loss suffered by the Federal Government is due to the failure of the Minister of Petroleum Resources for over 15 years to kick-start the re-adjustment of the sharing formula (the PSC) of 60 per cent share of oil profits to the Federal Government and 40 per cent to the oil companies.
The states further contested that the Federal Government had suffered huge losses under the PSC because of non-compliance with Section 16(1) of the Deep Offshore and Inland Basin Production Sharing Contracts Act which was said to have come into effect since January 1, 1993.
