The Federal Government of Nigeria has initiated moves to recover $62.2 billion (N20 trillion) from six (6) oil firms that defaulted in the payment of revenue (arrears) due to the government based on the deep offshore production sharing contracts.
The details: It was stated that some major oil companies had not paid arrears due to the government since the signing of Deep Offshore and Inland Basin Production Sharing Contracts Act CAP D3 Law of the Federation of Nigeria 2004 (amended in 2019) for oil exploration in deep offshore and inland basins.
It was also disclosed that the case instituted by the Attorneys-General of three oil-producing states – Rivers, Bayelsa and Akwa Ibom (as Plaintiffs) against the Federal Government added to the uncovering of the arrears.
In October 2018, the Supreme Court gave a ruling with orders that the Attorney-General of the Federation and Minister of Justice should establish a body which would be the vehicle for the recovery of arrears due to the government from the Production Sharing Contracts. A top government official reaffirmed the determination to recover the N20 trillion.
While the new amendment introduced key changes including the introduction of incremental royalty rate based on the price of oil, it also mandated a periodic review of the PSC arrangement every eight years with the government estimating that the move would help Nigeria generate additional 500 million dollars revenue in 2020.
The Act also entails that a contractor undertakes all the financial, technical and operational risks associated with petroleum operation in return for a share of profit in oil after payment of royalty, cost and tax oil.