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IOCs join NEITI in seeking review of laws on Production Sharing Contracts

Contrary to speculations that jittery has engulfed the spines of leading International Oil Companies (IOCs) over moves by the Nigeria Extractive Industries Transparency Initiative (NEITI) for a review of obsolete laws in the oil and gas contracts, contacted IOCs have called for faster review of Joint Venture regulations.

A key point to note is that the PSC, a form of joint agreement for exploration, development and production of oil resources, makes extractive companies to bear the cost of production.

In an interview with a General Manager in one of the leading upstream IOCs who pleaded anonymity, the official said “As a matter of fact, IOCs had been on the losing end of several JVs as we bear the highest risks and input costs ever in oil exploration and time has come for the risks to be equally shared or at least with the same margin in sharing income”.

“All government and NNPC in particular are after is going home with loin share in every successful exploration, but walks away when we lose billions of dollars after a failed effort. To me as a person, I think the validity of the 1993 crude oil Production Sharing Contracts (PSCs) provisions are draconian and clearly unfair and need to be reviewed to give both government and IOCs fresh air after all.

“Besides, the current sharing formula is discouraging further investments and it is important to note that several IOCs are just managing to survive with massive investments in latest technologies from time to time to make sure we remain afloat while government is seating in Abuja and going to bank on a daily basis whether IOCs are losing or not.

Business Hilights recalls that NEITI’s Executive Secretary, Waziri Adio, had called for review of JVs regulations while unveiling new NEITI dashboard in Abuja where he blamed the Federal Government for not being proactive in the review of extant laws guiding multinational oil companies.

The NEITI dashboard was developed as part of the implementation of the global Extractive Industries Transparency Initiative (EITI) policy on Open Data as the new platform would simplify the data in NEITI reports and create access to user-friendly data in NEITI reports, trend and analysis.

Adio argued that government has failed to act when there was need for a review of terms in the 1993 crude oil Production Sharing Contracts (PSCs) that was signed with oil companies even though he hailed the Nigerian National Petroleum Corporation (NNPC) for taking steps in releasing timely data on its operations.

NEITI boss added that Nigeria has lost over $21 billion since the terms of the contract, which was signed in 1993, became outdated.

Adio averred that “We believe in constant value, and one of the things we are going to do soon, is to study what we have done on the 1993 PSC. There are two trigger clauses in section 16 of the law”.

“One is that whenever the price of crude oil crosses $20 per barrel in real time that is adjusted for inflation, the contract should be reviewed in a way that is more financially rewarding for the country,” Adio noted.