The Nigeria Extractive Industries Transparency Initiative (NEITI) disclosed that Nigeria had lost at least $16 billion over a ten-year period (2008 – 2017) due to non-review of the 1993 Production Sharing Contracts (PSCs) with oil companies.
NEITI said in a statement by its spokesman, Dr. Orji Ogbonnaya Orji, that it arrived at the figure from a quantitative study which was done in conjunction with Open Oil (a Berlin-based extractive sector transparency group).
In its latest publication titled, “1993 PSCs: The Steep Cost of Inaction”, NEITI called for an urgent review of the PSCs to stem the huge revenue losses to the Federation.
The study indicates that the losses could be up to $28b if, after the review, the Federation were allowed to share profit oil from two additional licenses.
As noted in the brief:
“Between 1998 and 2005, total production by PSC companies was below 100,000,000 barrels per year while JV companies produced over 650,000,000 barrels per year’’. By 2017, total production by PSC companies was 305,800,000 barrels, which was 44.32% of total production. Total production by JV companies was 212,850,000 barrels, representing 30.84% of total production.”
NEITI in the policy brief stated that the Deep Offshore and Inland Basin Production Sharing Contracts provided for a review of the terms on two conditions:
The first review was to be triggered if oil prices exceeded $20 per barrel. Section 16 (1) of the Deep Offshore and Inland Basin Production Sharing Contracts specifies that:
“The provisions of the Act shall be subject to review to ensure that if the price of crude oil at any time exceeds $ 20 per barrel, real terms, the share of the Government of the Federation in the additional revenue shall be adjusted under the Production Sharing Contracts to such extent that the Production Sharing Contracts shall be economically beneficial to the Government of the Federation.”
The second review was to be activated 15 years following commencement of the PSC act.
